The RealEstateWeb ran a very interesting article recently about the three types of property investors; namely the Speculator, the Refinance Man, and the Traditional investor.

The speculator buys neglected properties in good areas, renovates them and then tries to sell the property at a profit. This is commonly known as house flipping. Flipping can produce significant profit over a relatively short period, but carries with it some hurdles. The added risk, tax and elbow grease needed often deters many would-be speculators.

The refinance man, focuses much more on capital gains. He typically refinances his properties once the rental income exceeds the bond repayments. In this way he avoids being taxed, and has additional cash to invest into other properties. If you’re interested in going this route you may want to align yourself with a good bond originator who will be able to lower your refinancing costs, and offer you a share of their commissions from the bank.

The traditional investor is interested in building his income statement through rentals. He plans to be debt free, retire and live off the rental income. By not selling his properties he also avoids having to pay Capital Gains Tax, and he avoids the burden of having to find a suitable investment to place his money in if he keeps refinancing.

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During tough times the speculator may struggle to find buyers for the properties he has renovated, while during a boom the refinance man could struggle as most people prefer buying and the number of rental tenants drop.

At the start of 2010 South Africa finds itself in a very interesting position, property prices are increasing and most analysts are optimistic about the year to come. While at the same time, the banks are concerned that many buy-to-let investors will struggle to find tenants try after the world cup, and be forced to sell their properties.

Prediction: Property prices will continue to grow during 2010, but if you hold out you might be able to find a bargain 2 or 3 months after the FIFA World Cup