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.

Real Estate Investment Strategies – Part 1 – Buy and Hold

By
doublef
Published: January 20, 2009Posted in: Real Estate InvestingTags: , , , , , , ,

Don’t make a mistake and think that investing in real estate is just buying and selling homes, it’s not. You need to have a strategy and do thorough planning or you WILL lose money. Over the next few weeks we are going to discuss various property investment strategies and share as much information possible to assist you in either choosing the strategy that works for you OR formulating your own strategy.

Buy and Hold

This is a strategy common to rental properties. Some people think becoming a landlord is easy, others think it’s hard. The truth is it’s a bit of both. You find a property, buy it, advertise it in the local newspaper for rent, get a tenant, sign a contract, and wait for the rental income to roll in. Yeah right…

The truth is you find a property and buy it. Transfer takes longer then you realized. Eventually the property is transferred, the transfer fees and costs are paid (by the way, these are two separate costs entirely…) and now you can start your newspaper classifieds campaign. By now you realize that you have already spent a considerable amount of money…well we have to get the place rented out so moving on.

Your lucky and the first week of advertising you get interest in your real estate investment GREAT!!! You organize to meet with your “new” tenant (by the way this person only wants to view the property, you don’t know for sure that they are going to rent the place).

The viewing goes horrible. Why is the place so dirty, is there ADSL? DSTV? And the list goes on… You don’t get the tenant.

So now you start to think that being a landlord was a stupid idea, but wait there is hope. You just need to plan and strategize better. Let’s see if we can help.

The way you should have done it.

The day you decide to become a buy and hold investor you needed to start researching and planning.

Buying costs (bond and transfer costs)

You need to know what the costs are going to be when you buy a property.

Well here is an example:

Property purchase price: R 500,000
Bond/mortgage amount: R 500,000

The following example is on a freehold property bought by a Natural Person.

Bond costs

Bond registration costs (incl. VAT) R 4,560
Stamp duty on bond * R 0
Deeds office levy * R 340
FICA fee (incl. VAT) R 399.00
Post & petties (incl. VAT) * R 399.00
Initiation fee (excl VAT) ** R 5,000.00
Total Bond costs: R 10,698

Transfer Costs

Transfer costs (incl VAT) R 6,840
Transfer duty R 0
Deeds office levy * R 340
Municipal valuation certificate R 100.00
FICA fee (incl VAT) R 399.00
Post & petties (incl VAT) * R 399.00
Total Transfer costs: R 8,078
Total costs: R 18,776

The following example is on a freehold property bought by a Trust, Closes Corporation or Company.

Bond costs

Bond registration costs (incl. VAT) R 4,560
Stamp duty on bond * R 0
Deeds office levy * R 340
FICA fee (incl. VAT) R 399.00
Post & petties (incl. VAT) * R 399.00
Initiation fee (excl VAT) ** R 5,000.00
Total Bond costs: R 10,698

Transfer Costs

Transfer costs (incl VAT) R 6,840
Transfer duty R 40,000
Deeds office levy * R 340
Municipal valuation certificate R 100.00
FICA fee (incl VAT) R 399.00
Post & petties (incl VAT) * R 399.00
Total Transfer costs: R 48,078
Total costs: R 58,776

* Approximation
** This amount could vary, depending on the loan size, but should never exceed R 5000 excl VAT

I am sure you can see the difference in costs from the above examples but don’t be fooled. If you want to be a smart real estate investor you better get used to the high costs because you can not buy in your personal name. The risk of losing everything you own is to great. (to get a better idea of how trusts work read our article on trusts: Trusts: a description in layman’s terms (with a twist of Latin)

Okay, now we have an idea of the buying costs next time we will look at risk management.

What could you do if…

By
doublef
Published: January 17, 2009Posted in: General Interest, Real Estate Investing, Wellness, mind, body and spiritTags: , , , , , , ,

What could you do if you had passive income were financially free and wealthy? Well let me tell you what I would be doing…this is a good exercise you should do as often as possible if you are serious about getting to this point.

Firstly I think of ALL these things as if they already happened and I am doing them. This way I feel inspired to keep trying even when times are bad. So let’s start…

:) I am driving the latest Mercedes Benz 4×4, and it is black…and chrome.

:) I own a beach-front property and every xmas my family and I spend time here enjoying the festive season.

:) Every year my family and I go on a trip to a country where we have not been yet.

:) I have a charity that I donate money to. I help out whenever I can.

:) I have interests in multiple real estate developments and buildings across the world.

:) I own multiple successful businesses. My businesses are managed by the best people in their various fields so I don’t need to be there everyday.

My list is very long, how about you add some…

How to make your small rooms look larger.

By
Nats
Published: January 16, 2009Posted in: Property improvement, Real Estate Investing, Real estate market, Selling real estateTags: , , , ,

It goes without saying that people prefer to get more for their money, more food, groceries, space, whatever.If you own a property that is on the small side this could be affecting your chances of getting your asking price.To be more specific if you are trying to sell a smaller property and the rooms actually look small it will be harder to get what you want out of the deal.

Here are a few tips to make those small rooms you have look bigger and more appealing to buyers.

1.Use Mirrors.Mirrors are an inexpensive way to “double” the size of any room.They come in all shapes and sizes and not only will they make a room look bigger they also make it look brighter.There have been some wonderful things achieved with large mirrors being placed on the wall opposite a sliding door that leads out to the garden.The mirror reflects the garden bringing it into the home creating a wonderful effect.

2.Keep it simple.Don’t allow a small room to appear cluttered, remove excessive ornaments or furnishings. If you let the room look busy people will think it’s bursting at the seams even though they only register a bed and a dressing table in the room.

3.Use lighter colours on your walls.This is to allow the room to appear as bright as possible.If you are a fan of blue or green go for it! Just don’t paint the entire room dark Hunters Green.Select a lighter shade of your favourite colour for the whole wall and use the darker shades to highlight certain aspects in the room, like the decorative trim.

4.Don’t use chunky overstuffed furnishings.These may be comfortable but they immediately draw attention to themselves and prevent the viewer from seeing the rest of the room.Use slimmer pieces that incorporate negative space into the design, like a chair with wooden slats for a backrest.This type of design makes it look as though there is more space in the room.

Smaller spaces make many people feel confined and uncomfortable, they may think you have overpriced your property, even if you have the square meters, simply because you didn’t pack away your collection of beer mugs with faces.

Is Real Estate for you?

By
doublef
Published: January 15, 2009Posted in: Landlords, Property growth trends, Real Estate Investing, Real estate market, Wellness, mind, body and spiritTags: , , , , ,

I am sure that there are many people out there currently out there trying to figure out if they did the right thing when they got into the real estate market. The current housing market is rather dull and frustrating but you need to remember that ALL markets turn.

The only encouragement I can give is that you need to try to hold on to that property, now is not the time to sell, now is the time to buy. Obviously if you can not buy right now don’t, rather save your current property portfolio.

Most economists feel that the first half of 2009 might still be “bad” but then it is going to turn and we will all dance in the wonderfulness of real estate again. Until then we need to buckle up, stay strong and fight with every last breath.

Some people find me a bit over powering when I speak about real estate and wealth, the reason being is that I know I am right and I know most people can achieve this if they only decide to.

So come on, be positive and strong, tomorrow will be here quicker than you know.

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