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Information, articles and news that is relevant to the South African property industry.

Where is the profit in Real Estate Investing?

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One of the first questions a buyer has for a Realtor is, how do you make money investing in Real Estate?
The answer to this very complex question is actually very simple. Buy low and sell high.

Some of the best real estate investors are home owners. When a person has lived in a home that they own, they have a better understanding of maintenance and repairs.

To buy low, there is always a reason that a house has a considerably lower price than similar properties on the market. The most common reason is that the property is in need of repairs. This is where knowledge comes in to the equation. Working with a knowledgeable realtor can be extremely rewarding.

The most successful investors that I have worked with, over the years, do the majority of repairs on the property themselves. This reduces the bottom line considerably. The wise investor also knows when and where it is necessary to bring in a licensed professional. I have also witnessed the owner, prior to the arrival of the licensed professional, doing whatever is possible; to reduce the necessary time the professional has to contribute to the project. In short, they are prepared before the plumber or electrician arrives.

The easiest and most advantageous upgrades are painting the interior and exterior of the home, and adding new flooring. Cleaning inside and out, and a well maintained landscape, is also an inexpensive upgrade that makes the home more marketable, and increases the property value.

Before purchasing the investment property, a wise investor has to do their homework. This includes, investigating the condition of the property, and calculating the cost of each repair realistically. This often includes checking the cost of materials, and bids from contractors for bigger projects or repairs. Once the full cost of repairing the house is estimated. The buyer has to then check the historical high selling price of the similar homes in the area. This will give them a good idea of what they could re-sell it for as soon as the repairs and upgrades are complete.
In the initial calculations prior to the purchase, also have to include what it would cost to sell the property, which can be as high as 8-10% of the sales price.

The largest capital gain in real estate investing comes from owning the property for a number of years. The principal balance of the loan decreases, as the market values slowly increases. That would be in a normal real estate market. Some investors have tenants rent the property till the mortgage is completely paid off.

Currently, the US is not experiencing a normal real estate market. The property values are still decreasing in many areas. There are many foreclosures. When a house has been foreclosed on, the previous owner usually remove many of the fixtures and have even been known to take the kitchen sink. The empty houses are also subject to vandalism. This causes the property values to rapidly drop. Real Estate is definitely driven on the premise of supply and demand. When there are more houses for sale then there are people to buy them, the value drops. This is a buyer’s market. Even the country’s greatest economist, do not know when the prices will hit the bottom, and the market will turn around. In the mean time if you are looking to invest in real estate, it is a great time to do so. As a wise investor once told me, don’t be afraid to make a low offer, it is better than no offer at all.

Property 2010.

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Many property owners believe that the worst is behind us and that next year can only get better. This may be a naive assumption  based only on the fact that things have already gotten so bad, people have lost everything they own, credit worthiness has been ruined and suicide rates are on the increase.

Jeez, that’s super depressing!!

Even so, having a totally pessimistic view will be detrimental in the long term as well as you may not see opportunities that come your way. While you are remembering the good times of years gone by you may ignore a lifeline that is cast in front of you.

None of us should give up, we should try and rescue ourselves until the last and not just get washed away to join the others who couldn’t hold on any more.

We should seek out assistance if we need it and not let pride dictate our future and our families futures’.There is no shame in asking for help and surviving.

So make a plan for the event that things may get worse and make sure you are still around to enjoy the Soccer World Cup and the benefits it will bring to the country.

No one knows exactly what is going to happen with property market next year and the general financial crisis but perhaps we will come out the other side better than ever. Here’s hoping!

When will the real estate market turn again?

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When will the real estate market turn again? This is the question of the moment. ABSA seems to think that starting next year the real estate market will start to recover again, let’s hold thumbs.

Well if you are still able to hold on to your property great. Lots of people are unfortunately not so lucky. There were many people who thought they could get in to real estate investing the last couple of years. As soon as they got in, the market trend and they lost everything.

So what do we have to learn from all this? If you are going to invest in property you better be ready for any market. You need an emergency fund for times when the rental won’t cover the bond. If you base your investing strategy solely on refinancing, you will struggle allot. Banks won’t let you refinance in markets like the one we are currently in, so don’t just bargain on them.

Well I hope that you are one of the lucky ones, if you are, please share your views with us and other aspiring investors.

Things can only get better. Hold on. Go check out the National Credit Act

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DontPanic1So the interest rate is down by 100 basis points and Tito Mboweni says we mustn’t expect any further major rate cuts. Our president, Jacob Zuma admitted that we are in for tuff times with the global recession. Now I understand that everything is looking dark and bleak but this is the time when we should stand up, take our lives by the rains and start moving in the right direction.

If you have unmanageable debt and it looks like you are going to lose your house, go speak to someone. If you need to find out what you can do and how to get help go to the NCA site http://www.ncr.org.za there is a lot of information available there. I know it is never easy to ask for help but rather do it sooner than later. Your other options are to go to your bank, write a letter to them as well, but go to them and talk to a HUMAN BEING, and see what they can do for you.

I always say you should try whatever you can and brace yourself for what could happen. As soon as the markets turn, and they will, if you managed to keep your real estate, you will be smiling again.

Real estate investing tips to keep in mind.

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real-estate-investingDon’t fight your market. Listen.

When you have real estate and you plan to rent it out make sure you have an idea of the kind of tastes your target market has. The easiest way to determine this is by looking around the neighbourhood at other houses for sale. Go check out the property and get a feeling for the kind of tenant you are going to attract and what they might like.
Obviously if you intend on selling the real estate you better know what the market wants or your property will stay un-sold for long.

Research. Don’t believe everything you are told.

It is very easy in today’s world to do a bit of research before buying real estate. You can go online and have information about the current owner, the general prices in the area and what is close to the property you intend to buy. Most importantly you will know if you are being taken for a ride. A good source for real estate prices would be sites where people list their property for sale like http://www.yes2property.com/classifieds (i know this is part of Yes2Property, but you get the idea :) ).

If you have to partner up, choose your partner carefully.

If you are a new real estate investor you are probably going to have to partner up with someone to get it to the real estate market. Now it can have it’s benefits but also it pit falls. When you have to choose a partner make sure of the following:

  • You trust them. If you can not trust your partner how are you going to make investments that could run in to the millions.
  • Be the money or the management, don’t be both. Group decisions can cause havoc on real estate investment. A plan should be formulated before hand and then you step away and each partner does what he is responsible for.

Negotiate and ask the straight forward question.

Go ahead, ask the seller exactly what he/she wants out of the deal, you might be surprised. If you find that the seller’s expectations are too high you can move on and save time.

Invest safely and wisely.

When you invest you DO NOT GAMBLE. Yes there are risks but they are calculated risks. The best way to invest wisely is to not invest based on continued price increases but instead on value. The investment needs to make sense in good and bad markets, then you have value. If the price keeps increasing it is a bonus.

Cash flow is king.

Real estate investing is about the numbers. Cash flow keeps the business going. You need to make sure that ALL your expenses are covered and that you have positive cash flow. If you don’t, you better have a BIG piggy bank to pay up.

I think the main rule in real estate investing, and any other type of wealth creation tool, is the following: Plan it, monitor it and grow it. O yes and use your common sense.

Bank charges still high.

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A report published by Finweek in August last year stated that ABSA was at that stage the most expensive bank to do business with. This may come as a surprise to some but many of the banks consumers have been aware of their high charges for some time.

ABSA may be the most expensive but they are certainly not alone in charging what many South Africans feel are ridiculously high bank charges. South Africans pay almost double the bank charges of other nations to use a cheque account. Nedbank was touted as the most the most expensive bank to use in the past but have since amended their charges to a certain extent and are now considered to be one of the cheapest banks to do business with.

What many consumers find confusing is that there was a major inquiry into bank charges by the Competition Commission that took almost two years to complete, the findings were released and banks were advised to change their pricing structure and lower costs to the consumer. What may have been unclear is that the Commission was not investigating any kind of illegal or cartel activity, with the result that they could not force the banks to do anything. They could merely encourage them to give the consumer a better deal.

Some banks did attempt to comply but the majority have just implemented their annual fee increase as though nothing had happened. The biggest complaint among consumers seems to be that they are not only charged high rates but also that they are charged for so many different things with each charge adding up to a very expensive total.

There are banks in the country that offer really low cost banking, such as Capitech, but their list of services on offer does not seem to be as comprehensive as those of the larger more established banks.

We usually do not have any choice but to interact with banks but maybe we should start to thoroughly investigate our options and not remain with one bank out of blind loyalty or ignore another because of preconceptions we may have about them. It is always your responsibility to get the best deal for yourself and maybe we consumers should raise the subject of bank charges again so the banks know we have not forgotten.

What do you think? Who is the best bank to bank with?

Money tips: 16 to 20 – Investment

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This week I am going to cover some investment tips. As an investor you need to have patience and a good outlook on the future. If you think you are going to invest in real estate or the stock market with a short term outlook you will be disappointed.

As always these tips come with a disclaimer. They are only tips, if you consider investing at all you should always consult a professional financial advisor first.

16. Investment

A true investor always invests for the long term. He knows that his investment needs time to mature and he will not rush to get there, that is when you make mistakes. If you really want to invest for the short term you will be better off using bank term deposits or money market accounts rather than real estate and the stock market.

17. Time not timing your investment

You should never try to time the markets or real estate you will lose money, Sure there are people that do this but successful ones are few and far between. Most of the time these guys die young with too much stress. The way to do it is to give your investment the time it needs to make you money, believe me you will not be disappointed.

18. Financial Services Board (FSB)

Always make sure make sure that the investment product you use is registered with the Financial Services Board (FSB). If things go wrong you will not have any means to take action. For more info check out http://www.fsb.co.za/.

19. Charges

Life assurance investments also known as endowments are priced higher with lower amounts. You should check the structure of costs in relation to the premiums and you might find that if you paid just a little bit more your cost will go down and increase your return on investment.

20. Regular investment

A good investment strategy in a volatile market is to invest on a regular basis. When the market falls you can buy cheap. If the market rises you can sell high. This also helps manage market sentiment, if you are always investing you don’t really get affected by what everybody else is thinking.

Until next time.

Renovating may add value to your property.

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In today’s property market we are all looking for ways to get the best price for our property or merely increase its value.There are a lot of factors involved in the value of your property one of which is the general condition and appearance of the site.This means the size and state the property is in.Other factors are the age,location,the availability of similar properties and of course extras such as a pool.

While there is not much that you can do about your properties location or availability of similar properties there is still room for improvement.Firstly security is a big plus these days and fencing and alarm systems could add some value.Another basic thing is a simple coat of paint,nobody wants to buy a home with a flaking,crumbling outdated colour on the outside and inside. It may be costly but it is certainly worth it and you will see a return.

Apparently there are three other areas one can focus on,the bathroom,kitchen and garage.Some times all an older kitchen needs are new taps and fittings.Anything you do in the kitchen though should include checking the plumbing as leaks will instantly overshadow any aesthetic changes made.Something else very popular is of course adding an en-suite bathroom to a bedroom.Make sure the dimensions of the room can handle it and all your cupboard doors will still be able to open all the way.

Other things can also be added such as a pool or even a tennis court in some cases,but remember the basics come first.A layout in the house that makes sense is a biggie .Don’t put the only bathroom downstairs next to the kitchen and try to maintain as much space and natural light as possible.

Some people have had the unfortunate experience of improving their home to such an extent that it is now far higher in value than it’s neighbours.This tells buyers they can purchase a similar property in a better area and it may take long time for your property to sell.

In conclusion check what’s right for your area, don’t spend too much and find a style that actually suits your property.Mismatching certain styles can really highlight your properties faults.

Benefits to buying repossessed property.

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When buying a repossessed property or PIP (property in possession) there are no transfer duties payable,unless you are a VAT vendor in which case they are payable.Transfer duties are often a major stumbling block for those who wish to purchase  property in todays market,because although growth isn’t that great at the moment the prices are still pretty high for the man on the street.

So maybe buying a repossessed property will make your dream home a bit more affordable and you could proceed with any needed improvements further down the line.One should also remember that the banks are not as readily giving 100% bonds at the moment, so if this is a saving it could assist you even more.

Transfer duties account for approximately 8% of the purchase price of a home and one usually pays transfer duties unless one buys a brand new home or development.There are various other deals regarding transfer costs in the market but it sounds better to me not to have to pay them at all.

You also have to be careful,as with everything,that you do not end up paying more for your property now than what it’s going to be worth in the next couple of years.If you are offered some kind of assisted payment deal and you have it in your mind to resell that property a few years down the line try and figure out what that properties market value will be at the time you wish to resell.In some cases you will end up losing valuable growth on that property because of what you paid initially.

So even though not paying transfer duties does sound great i would investigate any deal offered to me for all long term effects on my portfolio.

Investors and buyers could contact the banks to get information regarding their repossessed property.One should investigate all opportunities even if one does not act on them.

Expropriation bill put on hold.

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Government has announced they are putting the new Expropriation bill on hold until further notice.The proposed bill would make it easier for government to take over land from the current property owners and redistribute it amongst non-white farmers for the purposes of farming.

Government had set a target of 30% of agricultural land to be black owned by 2014.At this stage it stands at only 4%.Government is blaming the slow progress on white farmers,stating that they were not willing to accept the offers made on the land and that a willing buyer seller setup was not working.The farm owners are unhappy and say that the offers made are far under market value.

The new Expropriation bill was viewed as unconstitutional even by parliaments legal advisors,because it would have prevented the farm owners from taking legal recourse in the courts.This is the reason it has been shelved for now.

The land is to be redistributed amongst those whose land was forcibly taken from them,either by the Apartheid regime or British colonialism.

The bill may reappear in the next parliament,but government is also encouraging prospective  black farmers to apply for loans  to purchase agricultural land.

This is a tough subject and hopefully a resolution will be reached soon.