Let me start by saying that property is a sound investment choice. This view is, however, tempered by how, when and where you invest in property.
Take, for instance, the product being offered by two so-called companies, Careturus and Sun Homes, about which we recently published a Financial Services Board (FSB) warning.
The report elicited a rather silly threat from Pretoria lawyers Manong Badenhorst Inc in which they accused Personal Finance of defamation and of publishing incorrect facts. The lawyers threatened High Court action against both Personal Finance and the FSB.
As a result, Personal Finance has since done a bit more digging and I would suggest that anyone who places any money with either Careturus or Sun Homes should be very, very careful.
A genius's temper
In fact, if you want to invest in Sun Homes through the Careturus scheme or any other way, I would be extra careful.
One of the owners of Sun Homes, Renaldo Nortje, who describes himself as a "genius" in advertisements promoting his Sun Homes property products, told me threateningly in a telephone interview that he has a reputation for his temper. Using some rather choice language, he told me that he has assaulted other people who opposed him in the past and would be coming to my office to do the same to me.
He also bluntly states that he does not have any respect for the law.
However, what is of more concern is that the entire Careturus/Sun Homes product structure could be in contravention of the Collective Investment Schemes Control Act (Cisca) and/or the Banks Act and/or the Financial Advisory and Intermediary Services (FAIS) Act.
Careturus is a company headed by a Jean Bilala, who claims to be a fund manager.
A Personal Finance investigation, however, shows that his only experience is that of being a financial adviser. His financial service provider (FSP) number is 19531.
R50 million sought
Bilala says that Careturus is seeking to raise R50 million-plus to finance the development of a chain of boutique hotels that is being built by Sun Homes at Phalaborwa, St Helena Bay, Langebaan, George and Port Edward.
Bilala says the minimum investment is R10 000 and the minimum investment term is one year.
He says your money is pooled (a possible contravention of Cisca) and investors are issued with an investment certificate (a possible contravention of the Banks Act).
He also provides a 30 percent-a-year guaranteed return.
'Worthless' document
The return, he says, is backed by Sun Homes, which has ceded various properties it owns to Careturus. The cession document states that Sun Homes is represented by Nortje and his wife, Melda.
But Nortje admits that Sun Homes is only the trading name of Vexma Properties CC 219.
No mention is made of this on the cession document.
A lawyer consulted by Personal Finance says the suretyship does not make sense, because there is no principal debtor. He says it lacks the formal requirements of a suretyship.
For an investor in the scheme, the cession document is not worth the paper it is written on, the lawyer says, because:
- Immovable property is ceded. There is no registration in the deeds office and this makes the cession unenforceable against the property owner.
- The cession is to Careturus. This means an investor has no security against the property.
- Melda Nortje is the only member of the close corporation (CC). Renaldo Nortje is not listed as a member of the CC.
- A deeds office search reveals that Vexma Properties does not own any of the properties listed in the cession document. No valuation certificates or copies of title deeds of the ceded properties are provided.
In other words, the properties are not Vexma's to cede.
And this is still not the end of the story.
In the advertisements with the deceptively smiling face of Nortje, who is described as "managing" (sic), is the Careturus FSP licence number, but it is described as the FSP licence number of "Sun Homes Guaranteed Property Fund".
This is untrue.
The FSB has, quite correctly, taken action against Careturus.
It says that Careturus cannot describe the product as a collective investment scheme, or itself as an FSP, as it has done in some of its documentation.
The FSB has ordered:
- That Sun Homes/Careturus may not claim to be a collective investment scheme;
- The removal of the FSP licence number from all marketing material related to the scheme; and
- That Careturus "must cease all operations as they may be contravening the FAIS Act".
What worries me about all this is that people like Bilala and Nortje actually get people to invest in their dubious products.
Another expert
A few weeks ago, we also exposed how another self-proclaimed property expert, Coert Coetsee of a company called Treoc, is advising people to cancel their life assurance policies and to invest the money in his property products.
He also has an FSP number, which he uses to attempt to gain the stamp of respectability.
But Treoc's advice is reprehensible as it will involve losses for the policyholders.
As I said at the outset of this column, property should be in your investment portfolio but there are much better and safer ways of going about this than going the high-risk route offered by Careturus/Sun Homes (with the additional threat of being beaten up) or Treoc.
Safer ways to invest
You should treat most property syndications with great caution.
The better ways to invest in property include:
- Owning a property yourself;
- Investing in unit trust funds that specialise in property investment. (This enables you to invest smaller amounts of money while your investment is protected by the Collective Investment Schemes Act);
- Investing in property unit trusts, which are companies listed on the JSE; and
- Investing in property-owning companies listed on the JSE.
Your returns are likely to be much the same, if not better, than in the dubious products, where there are normally high costs, which will reduce your returns.