Risks & Rewards
Rewards
Altiru believes there are a number of excellent rewards to be reaped by buying investment properties at sheriff's auctions:
- Improved yield - Altiru's analysis of properties acquired on behalf of its investor clients reveal an average gross yield of 11.3%, and nett yield of 8.6% (including ALL costs).
- Immediate capital gain of 20%-30%.
- Double the Return on Investment (ROI) over a 5-year period as opposed to buying the same property at market value on the open market.
- Substantially improved Internal Rate of Return (IRR) due to the low acquisition costs.
Risks
There is, however, a number of risks associated with buying properties at sales in execution. In the table below the risks are listed on the left, while the measures Altiru has put in place to mitigate this risk is listed on the right.
| Risk | Mitigation by Altiru |
| The property may be poorly located, affecting its marketability and rentability. | Altiru is very sensitive to such factors as busy roads, taxi ranks, open veldt and other elements that will reduce the appeal of a particular property. Aerial photographs are studied, while we remain very observant of the environment during a physical drive-by of the property. |
| The amount of arrears is unknown. | Often the sheriff will provided the arrears at the auction. Altiru subtracts that amount from the maximum bidding figure you provide, ensuring that you stay within budget. Altiru attempts to determine outstanding levies for townhouses and clusters. When the sheriff is unable to provide the arrears, Altiru calculates a realistic worst-case figure which is then subtracted from your bidding figure. |
| The condition of the interior of the property is unknown. This risk is less pronounced for townhouses. | Altiru pays careful attention to the exterior condition of the property, under the assumption that it presents a good indication to the trained eye of the interior condition. |
| The ex-owners might refuse to give you occupation. Legally, you will only be able to obtain an eviction order after transfer. | Altiru establishes initial contact with the ex-owner, and invests significant effort to establish a trust-relationship with this person. The ex-owner is then requested to cooperate from the context of this relationship. This has worked excellently in 90% of cases, and the ex-owner is generally prepared to vacate the premises by the end of the following month. In the remainder of the cases, the ex-owner has vacated upon transfer. Altiru has never had to obtain an eviction order (yet). |
| The ex-owner might be sequestrated prior to transfer into your name. In such a case the auction-transaction is cancelled, and all your funds returned to you (with the exception of some sheriffs who retain their R9,177 commission). | An advertisement has to be placed in the Government Gazette to inform the public of the application for sequestration. Altiru regularly monitors the Government Gazette for possible sequestration notices affecting the properties it has purchased. Altiru discourages its clients to do significant maintenance before transfer. |
DEAL OF THE MONTH - September 2011 | CONTACT US | TESTIMONIES FROM ALTIRU'S CLIENTS |
|---|---|---|
 43 Broadwalk Crescent, Grand Central, Midrand (Townhouse) Market value R440,000 Acquired for R240,000 Rent R3,800 /m MORE |
Francois Smit072 997 4771 | francois@altiru.co.zaJohann Rossouw084 556 2940 | johann@altiru.co.za |
“We have received both professional and objective advice from Altiru.” - Vivien de KlerkMORE TESTIMONIES |