Make Money with Property Options

Property options is a great way to make money on properties without having all the associated costs and risks linked to property purchase and transfers.



Let us use this example. You can buy a property for R240 000 and sell it 18 months later for R300 000. Your gross profit is R60 000. You must deduct attorney costs and interest (if you do make use of a loan of say R240 0000). So let's say that your bond costs and transfer costs will come to a total of R15 000. Your interest for about 12 months on the R240 000 is R33 000. Your bond cancellation costs come to R3000. You also pay commission of R15 000. Total costs: R15 000 plus R33 000 plus R3 000 plus R15 000 = R66 000. You do get rental on your property for 12 months at R2000 per month = so your income is R24 000. Total expenses therefore is R42 000. This means that your net profit is R60 000 (gross profit) minus expenses of R42 000 = R18 000 profit. You have also put in R60 000 of your own money. You only made 30% on your money over a period of 18 months. It is a fair return, but not very exciting.



Now let us say that you buy an option to purchase this property for R240 000. You have the option for a period of 12 months. In the last month you sell your option to some-one else for a profit and he will then go ahead to purchase the property. Your expense is say R24 000. You sell your option for R48 000. You make R24 000 profit which is 100% on your original investment. This is a much higher return that the first route and you do not run the risk related to the property sale as such.



What would be important is to get the right option at the right price. Your option price plus the cost of the property must always be lower than the market value of the property. This way you cannot lose.



Property options may be for short periods of time - e.g. 30 days or it could be for 90 days or even longer. Expect to pay more for a longer option.



If you do want to invest between R5000 and R100 000 in property options, email: mailto:hansie@anamcara.co.za