In Property Stokvels that are working well, the returns for investors are incalculable. Usually, these schemes set out to achieve one of two goals:

• To purchase and rent out property where all members share in the monthly income
• To purchase a home for every stokvel member based on the order in which they joined

“One of the concerns around property stokvels is that the founder usually administers the stokvel at their sole discretion with carte blanche to run and manage the scheme as they want,” adds Rademeyer, ‘to ensure transparency, members must be given clear direction on what recourse they have if they’re dissatisfied with the administration of the scheme”. They also need to know exactly how the ownership of the purchased property will work, whose names will appear on the title deed and how the decisions are made when it comes to allocating property.

“There are also tax implications where multiple transfers of property are involved, so it is imperative that these are unpacked in the constitution of a property stokvel, and that members understand what could happen to them if the tax laws are breached,” says Rademeyer.

“Members need to consider the legal ramifications where stokvels, no matter what they invest in, are not juristic entities. They cannot acquire or purchase anything, they are not companies with shareholders, trusts with beneficiaries, or partnerships, therefore the constitution of the property stokvel needs to clearly set out its legal duties, as well as those of the founder and the members.

“On the plus side, a property stokvel that works well translates into cash purchases for properties and no waiting for banks to approve bonds, the money is right there waiting for transfer, and the power of ownership is transferred to the members,” says Rademeyer

In the end, it doesn’t matter if a property stokvel is run by your best friend or a stranger – In order to benefit, due diligence is a must, whenever it comes to your money. If you’re invited to join a property stokvel, Rademeyer recommends doing the following, long before you make any financial commitments:

• Ensure it has a clear and robust constitution.
• Know the leadership and membership structure.
• Ensure you know everything about where your money will be invested, and how it will be used.

According to Rademeyer, traditional stokvels are a much better way to save money for those looking to enter the property market. However, as with any financial investment, care must still be taken, especially as there has been rise in the number of scams involving stokvels.

“Property stokvels that come with the promise of wealth creation can be very appealing. But you need to be careful when joining a stokvel that claims to be investing in property,” concludes Rademeyer adding that potential investors should be absolutely clear on what they are investing in and that the returns are what was promised to them.