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Want To Start A Property Business That Buys Property And Rents It Out?

Information on starting a property renting business.

Shawn Theunissen

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Start your property rental business using this guide

I would like to start a property business where I purchase the properties and I rent it out, I already have a paid up property that I am renting out but my taxes are too high on the rental income so I am considering starting up a business. Could you advise me on where I can get more information on the requirements to start this and provide some guidance on whether it would be wise to pursue this business?

Before starting any business, it’s important that you’re absolutely clear about why you’re doing it – and that it’s going to be something that excites you, drives you and challenges you in the long-term.

If you’re only considering starting a property investment and management company to try and reduce your taxable income, then I don’t believe this is an appropriate – or a sustainable – solution.

You should rather consult a reputable financial adviser about other investment options that would better suit your personal needs.

If owning and managing properties is, however, an opportunity you would like to pursue, I would then recommend that you start off by equipping yourself with a proper understanding of what it actually means to be a landlord.

This will help you to make an informed decision about whether or not you want to start this (ad)venture as an entrepreneur. At a very basic level, here are some of the things you might want to consider to determine if this is the right business for you:

Initial cost

property-investment

You need to consider the initial cost that you will be incurring when setting up the business, especially since you have a property in your personal capacity.

You will need to transfer the property from your personal capacity into your business and pay transfer fees and transfer costs.

These costs will be calculated based on the current value of the property.

The work and planning

No matter whether you’re a residential or commercial landlord, property management requires a great deal of work and planning. Remember you will be responsible for all aspects of the property: From purchasing it to maintaining it on a day-to-day basis.

Related: Real Estate Business Plan Sample

This involves everything from transfer to managing the monthly utility bills, all the way through to replacing the geyser when it bursts and ensuring your tenants behave appropriately in the building. You would also need to source your tenants and ensure that they pay you on time.

All by yourself

tap

From a start-up perspective, you would probably need to do all of this yourself in the beginning. As such, you would need to work to build up your own database of reputable suppliers: Plumbers, electricians and handymen.

It’s important that you find experienced, qualified suppliers that you can trust, and who will be able to deliver on time and cost-effectively.

Related: Handyman Joshua Cox Of Trade-Mark On Thinking Like A Tech Start-Up

This can be a very time consuming process. Also consider that you would need to be on hand to facilitate all of this work: Arranging the call-out with the supplier and the tenant; overseeing the work delivered; paying the supplier etc.

Business owner development

Above and beyond that, you’re then going to need to develop yourself as a business owner. You will need to equip yourself with the skills and knowledge required to lead and manage this business in order to make it both sustainable and profitable.

This will require a significant investment from you: Time, effort and money. The more you commit to this journey of personal and professional development, the better your chances of success.

If you can picture yourself doing – and enjoying – all of the above, it’s then equally important to consider if this is a viable opportunity.

The greatest barrier to entry in this sector for you as an entrepreneur is probably going to be finance.

You need to be conscious of this from the outset.

  • Do you already have access to the funds you need to purchase the properties you are going to rent out?
  • If not, what are your plans to secure this funding? And what are the returns you are expecting?
  • Also consider the funding of the business itself. How will you finance this, especially during the first year?

My recommendation here is to take the time to do your homework – and the maths. While this could be a business opportunity, it might not be something that will be possible for you to do on your own.

Related: What You Need To Know To Become the Next Property Entrepreneur

If you have a feasible plan regarding the above, you then need to start working on developing a model for this business – as well as a strategy and plan. All of these will require research on your behalf: From reading Entrepreneur to accessing websites, possibly visiting walk-in centres etc.

This will include unpacking the actual opportunity itself – and determining if there really is a demand for your service offering.

Please note that the above are thinking or “trigger-points” – listed simply to give you an idea of some of the things you need to consider, as well as the mindset you will potentially need to adopt as an entrepreneur. Your response to them should give you a good sense of if this is the path you wish to walk.

Remember that entrepreneurship is a journey – and every day on this road is a learning opportunity. If it is for you, embrace it whole-heartedly, don’t be afraid of failure and be sure to seek out the assistance available to you.

Shawn Theunissen is head of Corporate Social Responsibility at Growthpoint Properties and the founder and manager of Property Point, Growthpoint Properties’ enterprise development programme. Shawn’s diverse enterprise development expertise includes designing and implementing business support services; creating market linkages between SMEs and large corporate entities; and providing capacity building support, and process and learning journey facilitation. For more information visit www.propertypoint.org.za

Start-up Industry Specific

How Do I Start A Transport Or Logistics Business?

An all in one guide to starting a transport and logistics business.

Entrepreneur

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Thinking about starting a transport business?

Forecasts indicate that the demand for freight transport will grow in South Africa by between 200% and 250% over the 15 to 20 years.

Some corridors, (high volume transport routes that connect major centres), such as the corridors between Gauteng and Cape Town (which amount to 50% of all corridor transport) will increase even faster.

The scope in the transport and logistics industry is varied – from a one-man show using a small truck to transport goods and offer services, to a fleet of transport vehicles which travel the length and breadth of South Africa’s roads.

Road transportation includes commuter transport from taxis to bus transportation.

It can be a tough industry and there are many threats facing transport businesses but if you get it right, you can build a successful business.

What is covered in this guide:

  1. How to start your transport and logistics business
  2. How to get funding for your transport business
  3. What are the costs involved
  4. Finding customers and getting transport contracts
  5. Getting onto suppliers lists
  6. Buying trucks and employing drivers
  7. What are the regulations and risks
  8. Where to find guidance to start your business.

Ready to get going? Click the arrow button to learn how to start your own transport business.

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Start-up Industry Specific

How To Start A Farming Business

Keep these nine points in mind when launching your new farming business.

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Start-up Industry Specific

How Do I Start A Security Company In South Africa?

There are two kinds of security companies, one that sells products and one that sells services or you can combine both.

Entrepreneur

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To start a security service company in South Africa you must register with the Private Security Regulatory Authority (SIRA). There are two kinds of security companies, one that sells products and one that sells services or you can combine both. It is estimated that the private security industry in South Africa employs over 400 000 individuals.

If you’re looking at starting a security guard company in South Africa, the following guide will be able to assist you in the deciding if it’s the right decision for you.

You need a lot of capital

Starting a security business requires a good deal of capital outlay and it’s highly recommended that one should have a background in this field.

Decide what kind of company you want to start

There are two kinds of security companies, one that sells products and one that sells services or you can combine both. Each sector falls under its own regulatory body.

What about area competition?

Greg Margolis is the CEO of NYPD Security, a niche security company that has operated for the last five years in the leafy northern suburbs of Johannesburg.

“To run your own security service company I think that you have to be well rounded in terms of not just being a good business person, but you also have to be a people person, a marketing person and know a good deal about the business.

“There’s tough competition, but I love what I do and wouldn’t sell my business even if I was offered triple what its worth. I am passionate about what I do”, says Margolis.

Starting a Security Services Business

To start a security service company in South Africa you must register with the Private Security Regulatory Authority (PSIRA). This includes paying a registration fee of R2 280 and writing an exam. Once you have passed the exam, proved that you do not have a criminal record, SIRA will conduct an inspection to establish whether or not your business meets the infrastructure requirements. A further fee of R1 710 is charged for the assessment. Each year the business is re-accessed which costs a further R500 plus the annual renewal fee or R520.

The following documentation is required for registration:

  1. An authenticated copy of the CM1, CM2, CM27, CM29, CM31 and CM 46 (apply at Registrar of Companies or Attorneys), if the applicant is a company;
  2. An authenticated copy of the Partnership Agreement if the applicant is a partnership;
  3. An authenticated copy of the trust deed and the letter of authorisation to the trustees from the Master of the High Court if the applicant is a business trust

Related:Steps for Setting the Right Prices for Your Security Business

Also required:

  1. The Suretyship form (SIRA 4) to be signed by the natural person who has taken full responsibility of the security business
  2. Every director, member, partner (as the case may be) applying for registration as a security business must have successfully completed, at a training establishment accredited in terms of law, at least, the training courses Grade E to B
  3. An authenticated copy of the Tax Clearance Certificate from the South African Revenue Service (SARS)
  4. An authenticated copy of the VAT Registration Number from SARS.
  5. An authenticated copy of the PAYE number from SARS
  6. An authenticated copy of the COID number (Compensation for Occupational Injuries & Diseases) from the Department of Labour
  7. Sufficient information in writing to enable the Authority to ascertain that the applicant security business meets the requirements with regard to the infrastructure and capacity necessary to render a security service;

This include, inter alia, the following:

  1. Submit a business plan to the Authority including the location and activities
  2. A resolution by the applicant security business stating that it will be able to operate for the next year
  3. The applicant proves that it has an administrative office that is accessible to the inspectors of the SIRA
  4. The applicant must have equipment which is necessary for the management and administration of the security business, e.g. fixed telephone, fax machine, a hard copy or electronic filing system for the orderly keeping of all records and documentation
  5. Show that the affairs of the applicant security business are managed and controlled by appropriately experienced, trained and skilled persons
  6. The applicant security business has at its disposal a sufficient number of registered and appropriately trained and skilled security officers for the rendering of a security service for which it has contracted or is likely to contract
  7. The security officers must be properly controlled and supervised
  8. The applicant security officer has at its disposal sufficient and adequately skilled administrative staff members for the administration of the affairs of the applicant
  9. The business must have has all the necessary equipment, including vehicles,  uniforms, clothing and equipment that must be issued to its security officers
  10. The applicant security business is in lawful possession of the firearms and other weapons that are necessary offer security services in respect of which it has contracted.

Related: Get going with a One Page Business Plan

Landing contracts

security-contract

The most important thing you can do to start and operate your own business is to develop a good business plan.

It’s invaluable because the business plan forces you to come to terms with your business. Selling the business concept seems to the problem, said Margolis. These are his five tips that will help to get the business going.

“The security industry in South Africa is very competitive. You have to get out there and you have to keep knocking on doors, there isn’t an easy solution”, explains Margolis.

Top Tips

1. Look at your business plan and decide if you have a competitive advantage. If not, work out how you can make the market understand the unique value your small business has to offer.

2. It is important to make yourself known. It isn’t difficult or expensive to increase awareness about the business. Attend ratepayer meetings, spend time at the local police stations, and attend meetings the police have with residents and businesses in the area. This way people get to know you and respect you and half the battle is won. Networking is the way to go.

3. It’s my experience that bigger companies are reluctant to give security contracts to a company that is a one-man show. Make sure that you have a structure in place. Clients need to know if something happens to you, the business will not fall apart, and the services they have paid for and you have agreed to supply, will not cease. Clients need to understand that besides experience, that you are credible and that all the checks and balances are in place. This must be one of the key selling points.

4. Consider taking on a partner. Choose a partner who has the attributes that you lack. The ideal partner would be one with strong links and contacts in the community that you want to work with. Let your partner control the selling side while you handle areas you’re strong in, such as expertise and service delivery. The other option is to employ sales staff.

5. Stay abreast of new trends in the field, and update your skills. This is something that I strongly believe in. You have to be well rounded in terms of not just being a good businessperson, but you also have to be a people person, a marketing and sales manager and know a good deal about the neighbourhoods you work.

 

Are you new to starting a business? Read 15 Things Every Newbie Needs to Know About Starting a Business

Security products

What are the requirements to start a security product supplier business?

If you are starting a security company that sells electronic alarm systems and other security products it’s wise to become a member of SAIDSA in order to provide your business with the credibility it needs to be taken seriously by the public and security service providers.

The objective of SAIDSA is to upgrade the quality and standards of electronic security and to protect the public from unscrupulous, “fly-by-night” operators. When a security system is purchased, an ongoing relationship is entered into between the purchaser and the security service company concerned.

The security service product supplier must have the infrastructure and the required expertise to support the relationship continuously.

Security Sector Regulatory Bodies

The security industry has established a number of bodies to regulate itself. Membership in these bodies is voluntary. They include:

Ready to get going? Here’s 10 Steps to Start Your Business For Free (Almost)

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