Cash is King!!!

By
doublef
Published: January 28, 2009Posted in: Buying property, Interest rate, Real Estate Investing, Real estate marketTags: , , , , ,

Yes cash is King. According to statistics the number of residential real estate transactions that were done without bond finance has increased to 50% in the last year. This is probably due to the rising interest rate.

Another reason for this is the fact that Banks lending criteria has also become stricter causing a lot less “credit” buyers in the market. Right now if you have the cash, you will be king. Anyone that can afford to invest in the real estate, or stock market for that matter now, and be patient, will make lots of money. I have heard some advisors saying that the days of awesome growth in the property market is over but I have to disagree. If you compare our real estate prices to the rest of the world we still have a bit to catch up and even if we don’t see extravagant growth again, we will still get descent numbers as soon as this market turns.

So is it a good idea to put all your cash in real estate? I have to be honest this is probably a question best answered by your financial advisor. The risk I see right now is that if you need access to your cash, for what ever reason, you probably shouldn’t tie it up in real estate because it is going to take a bit of time before you’ll see returns on the investment and if you try to take it out to early you will lose money.

So as always you should do proper planning before deciding what to do with your money, and you probably should do this with the help of a financial advisor.

Trusts in layman’s terms (With a twist in the tail?)

By
doublef
Published: January 26, 2009Posted in: Property trusts, Real Estate Investing, Real estate finance, Real estate lawTags: , , ,

Can you believe it the first month of the year is nearly at an end and I trust you all had a good rest over the festive period.

I thought I would share some new information with you that has just come to light and may not be common knowledge to all.

In the past you could “generate” income via a Trust to boost your income and therefore be able to qualify for larger bonds with the banks. The banks have become very strict on what they accept as income. Before they will accept it, they do some serious investigation first. The original concept of flowing the same money around is no longer effective. They want to see more substance, such as available equity or funds invested in Money Market accounts.

At this point in time the banks would only start looking at this if the Trust has been ‘trading” for longer than 2 years and the cashflow is of such a nature that these distributions are sustainable.

Yup, with a swish of the tail the policies change overnight and at this stage the banks are as confused as a chameleon on a Smarty box. Rumours are that the banks policies will be in place by the end of February and things should start settling down.

One thing has come through very strongly and that is that the criteria for obtaining finance have become much stricter and going to worsen as time goes on.

My prediction is that South Africa is going to become like the rest of Africa unless the policies change. Ten percent of the people will own property with the balance renting.

On the other hand………. We could be that 10% ?

Trust you have a wonderful day.

Andre

Will I lose my home immediately?

By
Nats
Published: January 22, 2009Posted in: General Interest, Interest rate, Property growth trends, Real Estate Investing, Real estate lawTags: , , , ,

Many people have never been through the trauma of repossession and just the thought of it makes many of us break out in a sweat, but do we really know what will happen?

Each case is assessed individually but alot of the time if you inform the bank  of your dire financial situation in time or are approximately less than 6 months in arrears your case will first be passed on to the banks pre-legal department. This department aims to assist in making repayment arrangements for clients who are in arrears, however as I said each case is assessed individually and you should contact your bank to find out what will happen in your situation.

You should then be true to your word and make the payments you have arranged.Most banks also have a system that allows for 3 strikes, if you fail to keep up your end of the bargain 3 times your case will then be passed on to the legal department. They will usually try and design another payment structure however this time they will try and have you sign a document that allows them to sell your home  or property using their own agents on your behalf if you again default. Always have a qualified person assess any document like this as there could be pitfalls for you if you sign it without knowing all the consequences thereof.

This is not a pleasant situation to be in and the best advice you can get is to contact your lender as soon as you become aware of a possible problem. Each case is unique but if your situation is a temporary one they will usually be able to offer help.

Is your property and its contents insured?

By
Nats
Published: January 21, 2009Posted in: General Interest, Insurarance, Property improvement, Real Estate InvestingTags: , , , , , ,

Hopefully most of us out there have insured our homes and belongings against theft, fire and other types of damage. Lots of us view it as an expensive pain in the neck and we think nothing will ever happen to us. However I have been very grateful in the past to at least have some sort of insurance cover.

South Africa is known for its high crime rate and high incidence of home invasion robberies, therefore theft insurance seems to be a no-brainer. Most insurance packages will also cover damage by fire, unless the fire is deliberately started. However the importance of fire insurance is sometimes overlooked by some homeowners.

Unlike a robbery, terrible as it is, fire can destroy all your belongings, the house itself and all the people inside. The western Cape is notorious for having a well documented yearly fire season between the months of December and April. Each year millions of rands worth of damage is incurred by homeowners.

It is not only bush fires that can damage your home. A cigarette can also start a fire very easily as can faulty wiring, so not only people in bush fire hot zones need this cover.

Those with insurance usually have a happy ending, this is not always the case though if the homeowner does not update the contents of his home or any extensions or improvements to the home. You are only covered for what your policy is worth. If you add a R300 000 granny flat in your backyard and don’t update your insurance you will have lost that money.

In the end the homeowner always pays because of the increase in monthly premiums after a claim.This is something you usually can’t avoid. But at least with insurance you may come out a bit better on the other side.

The South African Real Estate Market

By
doublef
Published: January 21, 2009Posted in: Buying property, Interest rate, Property growth trends, Real Estate Investing, Real estate market, Selling real estateTags: , , , , , , , , , , , , ,

On Tuesday Standard Bank released their residential property gauge that showed the median house price in South Africa is now R 592 000 (figures for December 2008). Last year, 12 months ago, the median house price was around R 611 000. This is the first decline since 1996 and Standard Bank said that the property market is currently very fragile.

Even though there is the possibility of another 250 basis points cut in the interest rate, some economists are not very optimistic about the real estate market. The reason seems to be the high inflation rate and slow economic growth, and don’t forget, the world is in an economic crisis. All these things have a negative impact on ALL markets and investment vehicles, but I personally feel that no one actually knows what is going to happen.

An example of “No one really knows”:

  • Standard Bank and First National Bank’s latest house price figures are more or less the same and shows a -1.7% drop in the average house price.
  • ABSA’s figures shows positive growth of 1%, but their senior property analyst thinks prices will drop by -2.5% in 2009.

Okay, yes, they are more or less the same but there is still no consensus in the data. Surely data is data is data…

If you are a home owner you need to be positively realistic. Believe that the property market will turn, but also prepare for if it does not turn quick enough. If you are an investor you probably already know that now is the time to buy and negotiate a better selling price. There are a lot of investors buying property now at 10%-15% below asking price and sellers that are unrealistic with their prices will find their property not selling at all.

Well I always try to keep a positive, open mind so, go out there and get your hands on bargain property and do what ever you can to keep your current property. 2010 is coming, Barak Obama is president of the United States and we have a stringer democracy in our country now then ever. Thins WILL get better.

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