Thinking about investing in property in South Africa? IGrow Wealth Investments positions itself as a comprehensive property investment solution, promising to help you achieve financial freedom through its buy-to-let strategy. But how does iGrow work? Should i use them as a property investor? Let’s unpack their strategy, and their offering and if this is right for you.
What is Igrow?
According to their website, IGrow is a leading South African property investment group. They specialize in creating, structuring, and building property portfolios for investors. They offer an end-to-end service, from start to finish. IGrow encourages (potential) clients to use Section 13sex in the tax act to make investment property profitable.
How does the property investor’s life cycle work?
I know I am oversimplifying the process, but for the sake of understanding the business strategy and offering of IGrow, the following is the process that is followed. Property investors…
- Decide on a legal structure for their property portfolio (Company trust structure, trust or own name)
- Choose an investment strategy (cash flow or asset value properties) and tax strategy (e.g. Section 13sex)
- Finding a property that adheres the their strategy
- Make an offer to buy the property from the developer or seller
- Use an agent for (or use their own) offer to purchase
- Get a mortgage originator for a bond (or pay cash over to the transfer attorneys)
- Once approved, sign the paperwork with the bond and transfer attorneys
- Find and manage tenants – or/and use a rental agent
- If you’re a control freak like me, you would probably get involved in managing the sectional title scheme as a trustee
- Do the day-to-day tasks such as approving/managing maintenance on your property, paying levies, rates and taxes every month and submitting your property tax returns (or getting your property company’s accounts audited). You might also opt for property and tenant insurance.
- Eventually, you would utilise your property exit strategy by either selling or transferring the property over to your children as generational wealth
What are Igrow’s services?
IGrow works with and/or employs a whole range of specialists. These include architects, property agents for sales, lawyers, financial planners, construction industry specialises and sectional title scheme management agents. They attempt to cover the whole property investor lifecycle with their offered services.
Property Investment
IGrow constantly researches many opportunities out there to ensure there is high rental demand and significant capital growth returns. Once a promising development has been identified, we then negotiate these properties below their market value for our investors.
– iGrow’s homepage
Igrow offers a selection of exclusive investment properties for sale. They specialise in Krugerrand properties – properties with low rent, but a larger growth in capital. They find vacant land, create plans and build sectional title scheme properties that they will sell to investors. Their agents handle the whole process from the initial sale, mortgage origination to bond and transfer attorneys.
Once the property is registered, they will also manage the property on your behalf. This includes rental management services, taking care of tenants and property maintenance.
They also offer accounting/tax services specialising the the company/trust structure that they offer, as well as someone to be an external trustee on your trust.
IGrow’s Investor Software
IGrow offers property investor software designed to help you make sound property investment decisions and support their product offering. It also has tools for comparing traditional investments, properties with bonds and ‘new or unused’ Section 13 sex properties.
The software has hefty a price tag of R 15 000.
Financial Planning Using IGrow
Though IGrow doesn’t offer financial advice explicitly, they do have tools, reports and other products/services to assist you in making the right financial decisions.
The Wealth Plan is a comprehensive report that tracks traditional investments, including pension funds, retirement annuities, and your investment properties. It helps create a roadmap to reach investment goals more strategically with guidance from professionals. The plan provides a holistic overview of your retirement portfolio, sets the date of your financial freedom, and manages, optimizes, and reviews your portfolio’s financial performance.
IGrow And company//trust structures
The weakness of Section 13sex is clawbacks. If you decide to sell your property during the first 20 years, you would need to repay the total amount that was deducted through tax. To counter this, IGrow advocates the trust//company structure so that the trust can be registered in someone else’s name if you want to get ‘out’.
Therefore, IGrow assist you with setting up the company//trust structure as well as assist in:
- Annually managing the accounting and tax of the company and trust
- CPIC and other regulatory compliance for trusts and companies
- Having one of their experienced external trustees on your trust’s board
Insurance and mortgage origination
Due to the nature of investment property, you might have quite a few loans. To cover yourself, it’s recommended to have insurance in case something happens. Oh the wonderful idea that IGrow offers income protection!
But that’s not all, it would make sense that IGrow would also assist with home loans. From my research, IGrow uses MortgageMax (Part of the BetterHome group, who also owns BetterBond) to get you the best interest rate from the all the banks.
What are the benefits of using IGrow?
One-stop shop: Igrow offers a range of services, potentially simplifying the property investment process for beginners.
Focus on buy-to-let properties: They target properties with rental income generation in mind, a common goal for many South African investors.
Tax optimization software: Their software could be a valuable tool for maximizing returns through tax advantages.
IGrow reviews – What do clients/tenants say?
You sign a lease agreement then just charge whatever they want without notification of increases. Been a tenant for 3 months this is unacceptable anyone that can advise how I contact rental tribunal as they are changing what was on the lease agreement without notifications.
– Hello Peter review
IGrow’s Google rating isn’t doing too bad, however, there are quite a few issues on Hello Peter. From most of the posts, it seems like their rental agents aren’t transparent about fees, cleaning and maintenance aren’t done properly for new tenants and their communication is horrible.
It is however interesting how IGrow perceives its Hello Peter ratings in comparison with the actual ratings. See the screenshots above for reference.
What do past investors say?
Reviews from investors are mixed. While some investors praise their service and the quality of the properties, others mention a lack of transparency and feeling pressured into sales.
My personal experience with IGrow
Let me start out by saying I’ve not bought any properties through IGrow. I have however had a meeting with one of the sales people (who is also a financial planner).
We met up at a coffee shop in Johannesburg. I told her about my property portfolio and the 1% NET rental factor rule that I apply (i.e. a R 500k Property should give me R 5k per month AFTER rates, taxes and levies). She told me that IGrow cannot offer me similar deals. She proceeded to open her handbag, take out her business card and slipped it across the table and said “If you have any more of these deals, I am personally interested”.
Needless to say, I was slightly disappointed.
My personal opinion of IGrow
IGrow is a classic case of vertical integration. They control the whole chain in the property investor lifecycle – from property development, sales, and lawyers, to mortgage origination and rental agencies. I am quite sure that IGrow locked itself into the sectional title scheme as managing agent, as well as the only rental agent that can manage tenants.
I chose rental property investment because I have trust issues. although I do invest in single stocks and ETFs, I generally don’t like handing over my money to other people for investment purposes. If you don’t have trust issues, then this might be for you. Als, if you’re planning to scale your property portfolio and want minimum control, a full end-to-end solution for large property portfolios, then you might consider IGrow.
“You make your profit when you buy, not when you sell”
Robert Kiyosaki
Concerning the big focus on section 13sex, I believe it helps make a property investment profitable – however, it’s only one factor of many. In my experience, if you buy a bad deal, you can’t make it a good deal. If you buy an okay deal, it’s easier to make it a good deal. What I’m implying is that I find their properties fairly overpriced.
Some time ago, I drove past some of their properties in Parklands (Parkhill Place), in the northern suburbs of Cape Town/Blouberg. Just down Sandown Road is a very dodgy-looking informal settlement, which is neither appealing nor a characteristic of a Krugerrand property.
As previously mentioned, IGrow specialises in asset value // Krugerrand properties where the value increases much more than the rent. The two just don’t align for me.
Conclusion
Apart from EasyProperties, IGrow is one of the few companies specialising in property investing. It is awesome that with them, you don’t just own a share in the company, you own the properties. To be more explicit, you appoint the trustees to the trust, which owns the company that owns the property.
It is a good option for South African investors who are new to property investment and are looking for a comprehensive, hands-off approach. However, it’s important to crunch some numbers as the properties might need a steep deposit to make it profitable over the term of the home loan and the running costs of the company//trust structure can be expensive.
Also, be aware that you will be locked into the IGrow ecosphere for any properties bought through IGrow. For me, that’s a big risk, as I don’t have control over choosing to use a rental agent or self-managing my properties and so forth.
So, it boils down to how much control do you desire over your properties. If you want more control, the IGrow is not for you. If you want less control and more passive income, then you could consider them.
Happy investing!