Category Archives: Real Estate Investing

Information, articles and news that is relevant to real estate investing in South Africa.

Get ready for the turning of the tide.

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In today’s “hostile” financial climate we all need to tighten our belts and hold off on spending. The world is changing and big things await those that have patience. Now is the time to save and get ready for the big turnaround.

If you ever wanted to get into the property market the time is coming soon. As soon as the financial tide turns there will be lots of bargains up for grabs. Now I know that there are bargains out there now, but I would caution any one, that wants to be a real estate investor, from buying now. The market, and this is just my opinion, is not stable yet and we are still in for a rocky ride.

Instead of buying every “bargain” now, rather save up for when the time is right. The more cash you have in hand the better. If you have cash, you have negotiation power and you can get property at even better prices. And once you get a foot in the door, at the right time, your real estate empire will grow.

Now there are lots of ways you can start saving and one affective way is to make sure you have the best credit card deal, you will be amazed how much money you can save, and then pay off debt, if your credit card rate is good. And sooner than you know your debt will be paid off and you are financially free.

So start getting ready today and when the tide turns, you will reap the rewards

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.

Create lasting wealth by investing in real estate.

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investing-in-real-estateIf you are looking for a way to secure your future wealth and a way to make an income when you retire the real estate is definitely the way to go. Even though people will say that the stock market has better returns you can make real money and create lasting wealth by investing in real estate. The key is to make sure you know what you are doing and don’t fall for all the hype.

Yes there are people that lose lots of money in real estate but usually it can be because of lack of knowledge. If you do the research and learn before you invest you will come out fine. Don’t listen to gurus that tell you how to get rich quick, do the work and the pay-off will come. There are so many ways you can invest and make money that the sky is the limit.

Be patient and take your time, but don’t wait to long. The internet is full of resources that can show you how to become a successful real estate investor. The great thing about property is that it never goes away and it does, in most cases, weather the storms. You just have to make sure that you cover all the risks and have contingency plans in place. Also make sure you can actually afford to do it. If you can’t, make a plan and start moving towards your goal. Before you know it you’ll be building wealth that will last for generations.

I hope this has been a realistic look at investing in real estate because I really believe that it is one of the safest ways to make money, if you do the work. Remember that nothing can last that comes easy, but working hard is relative. If you love what you do it is not work. If you want to be passionate about something, why not real estate, it will reward you in the end. Read more about Profit in Real Estate Investing.

Is Investment Property Still a Good idea?

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There have been a lot of people that were hit hard with investment property in South Africa during the Global Economic Crisis and this question seems to come up more often now. So is Investment Property Gone Badinvestment property still a good idea and can the ordinary man on the street make a success of it?

Well I’m here to tell you that it is still a great idea and you can make a success of it. If you are one of the people that ran into trouble with investment property here is some advice:

Learn from your mistakes

Being successful with investment property takes experience and patience. There are a number of so called “gurus” who sell you promises but as soon as the tide turns they turn around and blame you, the investor, for your failure. Personally I actually agree with that. You were the one that made the decision so you have to accept responsibility. So the first lesson you need to learn is that you need to do research and calculate if a certain type of investment property strategy can actually last, even through a Global Economic Crisis. A particular method of investing is based on refinancing your properties and as many investors have now learned when the going gets tough, the banks don’t refinance no more…

Don’t give up

Yes, you got burnt, so what. Take a deep breath, sit down, and write out a detailed plan on how you are going to get out of the mess you’re in. Many investors have found the banks to be relatively accommodating, well at least some of them. The important thing is to do proper research on investment property before you get in to it again. You need to bank the experience you got and get back on the horse, but with the right saddle this time.

Yes, it is probably going to take you a couple of years to get back into the market but use this time wisely and learn as much as you can so that when you are ready for investment property again, you’ll have the knowledge and the tools to make a great success of it.

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.

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.

Prepaid water meters unconstitutional.

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Residents of the Gauteng township Soweto, have taken the matter of the constitutionality of  prepaid waters meters to the Supreme Court of Appeals today.

This is after they already won their case against Johannesburg Water and a High Court Judge ruled that not only were the meters unconstitutional but the residents were to receive 50 litres of free water per person per day. This was in 2008, yet Johannesburg Water continued to install the meters even after the court ruling.

The residents also state that prepaid water meters installed in properties in wealthier areas work on a different principal because the wealthier residents are given an opportunity to make representations and are allowed adequate notice of disconnection.

The basis of the residents’ argument is that water is a basic human right and the restriction thereof is unconstitutional. The residents not only want the meters removed but they are also campaigning for more free daily water.

The matter will probably end up being heard in the Constitutional Court if Johannesburg Water continues to fail to comply with the High Courts ruling. This will probably set precedent and will demonstrate whether or not the South African constitution is followed when it comes to the most basic matters that are important to everyday life.

What do you think? Should free water be made available to the poorer communities in South Africa?

Common complaints about neighbours.

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We buy a home with a vision of how wonderful it is going to be living there. However sometimes we end up getting a nasty surprise that for the most part we can do nothing about, bad neighbours.

The problems our neighbours can create for us are endless, ranging from annoying through to downright destructive behaviour. People take it very personally when others affect their ability to enjoy their home and privacy and this is compounded when the problem lives next door 24/7.

The most common complaints people have of their neighbours are the following:

Rubbish all over the place
Barking dogs
Noisy children
Parties all the time
Spousal fighting
Spying on you                                                                                                                                                                                                                      Parking disputes

All of these issues, if left unchecked, may put a great deal of stress on your relationship with your neighbour. I lived in a rented house a few years back that had a family with two small boys living next door. The children enjoyed throwing their toys over the wall and watching them smash on the paving I had at the back. The tenant before me had merely thrown the pieces back over the wall, I didn’t want to do this for fear of injuring one of the children as they were rather large toys.

I know children will be children but their parents never scolded them for dirtying my yard and it was only after they started throwing drill bits at people that I was forced to increase the urgency of my complaints. I had children myself that may have been injured.

Whenever dealing with their parents I was always polite but firm because they would try and excuse the behaviour by saying that it only happened a few times a week and we should just throw everything back over the wall which I refused to do. The parents needed to realise how inconvenient it was for me to keep dealing with their mess by making them come and fetch the things that were thrown over.

Eventually, after many months of complaining every time it happened, they finally stopped throwing their things over the wall.

The best way to deal with something that is basically just annoying is to be persistent but polite. Eventually your “annoying ” persistence should show results.

However in the case of more serious transgressions one should always deal with the authorities, such as vandalism of your property by a neighbour or threats of violence.

Remember that when dealing with a neighbour you are more than likely still going to be living next door to them for years to come and that it is very unpleasant having a bad relationship with your neighbours. Try and keep your dealings with them as amicable as possible.

Real Estate Investment Strategies – Part 2: Risk management

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.Ok, I agree. Risk management isn’t really a real estate investing strategy but it is a very important part of real estate investing. If you are considering investing, you need to make risk management a top priority in your strategy.

What is risk management?

Well it is actually the term for long/short term insurance e.g. life insurance and home insurance. The problem here is that this isn’t the only risk management you should do as a property investor. Risk management, as far as I am concerned, is planning for the unforeseen, making sure you are protected when things don’t go your way.

So how do you manage your risks?

First thing you should do is identify all the possible risks that a real estate investor could face here are a few:

Crime

If your property has a stove, cupboards, light fittings etc. you need short term insurance. The last thing you want is to have to get cash somewhere to replace a stove.

Fire and water

Another good reason to have short term insurance is because your property could burn down. Another possibility is water damage. I am sure you’ll agree that these two elements can ruin a good piece of real estate.

Tenants

If you are going to be an investor you will probably have tenants that assist you in paying off the bond and maybe even provide you with a steady income. The problem is when your tenant defaults on his rent. For this reason there are some ways to manage these risks.

Firstly you could take out landlord insurance. This will assist you by paying the rental for up to 3 months if your tenant can’t pay any more. The 3 months is just about enough time to take legal action to remove the tenants from the property.

The second thing you could do is mange your cash. If you are able to put away about 8-10% of your rental each month you will build up a sufficient backup fund that could help you out when your tenant defaults or if you don’t have a tenant. It’s always a good idea to have an emergency fund available for unforeseen events.

Negative cash flow

Yeah, you will probably have negative cash flow, for a while at least. The only way you can manage this risk is by making sure you have sufficient cash in reserve to cover the shortfall until you either sell the property or have positive cash flow.

Interest rate

Yes the old interest rate. You need to plan well ahead and make sure you manage how interest rate changes affect your real estate investments.

You need to prepare for at least a 1% raise in the interest rate. This way you will be able to last in a downward market. I am not saying that the interest rate will only go up by 1% but this should at least give you a fighting chance.

On the other side, when there is an interest rate drop you should save the extra cash you have and build up that emergency fund. This way you’ll be prepared for ALL markets.

Death and taxes

Don’t mess with the tax man. Pay your taxes when you need to. If you are paying lots of tax, you are probably making lots of money. The last thing you want to do is go to jail.

Right enough of that now we come to death. If you die who will take care of all your real estate? Will they have the money to pay all the expenses etc.? If you are building a real estate empire that will empower your family you need to protect your assets.

You will need life insurance to cover the debt and expenses of your property portfolio. You will probably need to have all your assets in trust. This way you avoid the red tape where your estate is concerned. For more info read our article about trusts called: “Trusts: a description in layman’s terms (with a twist of Latin)”.

There are other risks you should also consider, it is always a good idea to make a list and plan for each risk you feel you have. Lastly you should review and asses your risks on a regular basis.

Next time we will talk about flipping.

Coastal property buying tips.

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If you have always had the dream of buying a property on one of South Africa’s beautiful coastlines but have no idea how to start looking read the following and it may make it easier for you.

First ask yourself what you are going to be using the property for. Is it going to be your holiday home that you utilise once or twice a year and rent out to others for the rest of time, will it be your retirement home or will it be your permanent residence for yourself and your family. Answering this will focus your search as you will then know what the home will need to have.

If you are buying the coastal property purely for investment reasons there are more things to consider. Usually a property that is close to the beach that has a sea view is a sound investment. However if the view is what makes the property so valuable do some research and find out if there are any developments planned for your area that may interfere with your view or accessibility of the beach. Some buyers have been sorely disappointed when after purchasing a great house with a great view some developer goes and builds a high-rise beach front apartment complex right in front of their house.

Other things that will either increase the value of your home or improve it’s re-sale chances are the following:

1. A low crime rate. Investigate the areas crime rate and the measures in place that are there to manage the crime rate.                                                                                                                                                                                                                                      2. Investigate the need for tourist accommodation, it doesn’t help if you buy the property to rent out in the holiday season and then afterwards discover the market is completely over saturated and there are many similar houses that stand empty all season.                                                                                                                                                                                               3. If the property is close to the beach, shopping malls, parks, schools and hospitals it will be even more valuable.

So, know what you want and investigate all prospective investments thoroughly.