I WANT TO GET INTO THE PROPERTY BUSINESS ON A PERSONAL LEVEL - I'M JUST NOT SURE WHERE TO START!!!!!!
Thanks for the frank and open emails I have received lately and just to touch base here are some of the real deal answers.
Thanks for the frank and open emails I have received lately and just to touch base here are some of the real deal answers.
Yes, it gets quite daunting as everyone seems to worry more about themselves first and only then consider any form of straight and open answers to where to go and how to get involved. There are no 100% fixed rules except for death and taxes, but these are the guidelines we use and have done so successfully.
I, and my whole family, Wife, son, sisters in law, brothers in law etc are in the property business and not only do we do financing (Mortgages) but we do a lot of what you want to do. We buy, invest, build, sell etc as this is a great business to be in and the risk lies with you 100%.
Firstly let me answer some simple questions examples are R 20,000 income (Gross) and R 500,000 purchase price.
1. You can buy as many properties as you want. The key is can you afford them. Most folks think that by buying a property for e.g. R 500,000 and having a bond for R 5500 per month and renting it out for R 5000 per month automatically means you can qualify for another R 500,000 house.
The basic rule (An there are always variances between banks) is that Your income of R 20,000 allows you to spend about 30% thereof on a home loan so you can afford R 20,000*30% = R 6,000 per month.
When you have additional rental income the average the banks take into account is 60-70%(Lets say 65%) of this. So if you are renting for R 5000 per month you can add R 5000*65%=R3250 to your R 20,000 salary = R 23250 * 30% = R 6975 - That's what you have to pay bonds from a qualifying perspective.
In truth if you have a good surplus of money left after your normal expenses food etc this will assist the credit manager at the bank in giving you slightly more.
With the interest rate where it is now (Even when the bank give you a better rate (Concession) you can work on about spending R 1,100.00 per month on every R 100,000 borrowed from the bank.
2. So you can own as many properties as you can afford ON YOUR OWN, WITH A SPOUSE, WITH FRIENDS, IN A CC, TRUST or COMPANY
3. Maximum people in a mortgage/ownership go crazy but in a legal business a max of 49 else it must be a company-public
4. If you stand surety for someone in a loan the banks view that as a 100% commitment for the full loan in your name even though you are not paying the bond etc SO be very careful here.
5. Taxes/Penalties - You don't face that for owning BUT you will pay Capital gains Tax when you sell and make big profits. However remember you will always pay tax on income in any case, there is no getting away from this. In fact you should dream of paying the receiver of revenue a million rand tax because then you have made some serious money!!!
6. Typical the shortest time is one year, but you can sell immediately after taking ownership. The penalty is 3 months interest of the mortgage. Sometimes its worth it. This is actually not a big deal if you are making a good profit on the sale. i.e on R 500,000 bond the interest is about R 4500 per month initially so you may be billed with a 3*R 4500 penalty = R 13,500.00. But if your profit is R 55000 then its worth it.
7. Buying vacant land and developing later not a bad idea, however getting a 100% loan on vacant land is less possible and usually if you get this its over 15 years vs 20 years and your monthly payments are higher.
8. Buying off plan can sometimes seem cheaper but trust me the developers build everything into the development costs so nothing is free.
9. With all deals there are attorneys fees for transfer and Registration of the bond and your safe bet is to work on about 7% of the deal. i.e R500,000*7% = R 35,000 It will be less than this but build in this factor ALWAYS If you save use the money elsewhere
10. Lastly - Make sure your mortgage has an access facility - this is where you become your own banker and start saving money
I hope this assists all you budding property moguls!!!!!
If you want us to do an affordability study for you we will and that will clearly tell you where and what you can buy email me
Have a great weekend
I, and my whole family, Wife, son, sisters in law, brothers in law etc are in the property business and not only do we do financing (Mortgages) but we do a lot of what you want to do. We buy, invest, build, sell etc as this is a great business to be in and the risk lies with you 100%.
Firstly let me answer some simple questions examples are R 20,000 income (Gross) and R 500,000 purchase price.
1. You can buy as many properties as you want. The key is can you afford them. Most folks think that by buying a property for e.g. R 500,000 and having a bond for R 5500 per month and renting it out for R 5000 per month automatically means you can qualify for another R 500,000 house.
The basic rule (An there are always variances between banks) is that Your income of R 20,000 allows you to spend about 30% thereof on a home loan so you can afford R 20,000*30% = R 6,000 per month.
When you have additional rental income the average the banks take into account is 60-70%(Lets say 65%) of this. So if you are renting for R 5000 per month you can add R 5000*65%=R3250 to your R 20,000 salary = R 23250 * 30% = R 6975 - That's what you have to pay bonds from a qualifying perspective.
In truth if you have a good surplus of money left after your normal expenses food etc this will assist the credit manager at the bank in giving you slightly more.
With the interest rate where it is now (Even when the bank give you a better rate (Concession) you can work on about spending R 1,100.00 per month on every R 100,000 borrowed from the bank.
2. So you can own as many properties as you can afford ON YOUR OWN, WITH A SPOUSE, WITH FRIENDS, IN A CC, TRUST or COMPANY
3. Maximum people in a mortgage/ownership go crazy but in a legal business a max of 49 else it must be a company-public
4. If you stand surety for someone in a loan the banks view that as a 100% commitment for the full loan in your name even though you are not paying the bond etc SO be very careful here.
5. Taxes/Penalties - You don't face that for owning BUT you will pay Capital gains Tax when you sell and make big profits. However remember you will always pay tax on income in any case, there is no getting away from this. In fact you should dream of paying the receiver of revenue a million rand tax because then you have made some serious money!!!
6. Typical the shortest time is one year, but you can sell immediately after taking ownership. The penalty is 3 months interest of the mortgage. Sometimes its worth it. This is actually not a big deal if you are making a good profit on the sale. i.e on R 500,000 bond the interest is about R 4500 per month initially so you may be billed with a 3*R 4500 penalty = R 13,500.00. But if your profit is R 55000 then its worth it.
7. Buying vacant land and developing later not a bad idea, however getting a 100% loan on vacant land is less possible and usually if you get this its over 15 years vs 20 years and your monthly payments are higher.
8. Buying off plan can sometimes seem cheaper but trust me the developers build everything into the development costs so nothing is free.
9. With all deals there are attorneys fees for transfer and Registration of the bond and your safe bet is to work on about 7% of the deal. i.e R500,000*7% = R 35,000 It will be less than this but build in this factor ALWAYS If you save use the money elsewhere
10. Lastly - Make sure your mortgage has an access facility - this is where you become your own banker and start saving money
I hope this assists all you budding property moguls!!!!!
If you want us to do an affordability study for you we will and that will clearly tell you where and what you can buy email me
Have a great weekend
3 comments:
Yes Its nice to know whats happening as everyone seems confused or just plain not interested unless you show them the money
Thanks Guys
Hi Freddie Thanks I will visit your goodies today We have been working flat out at getting more info that really aims at the man in the street who struggles to get to grips with property ownership and keeps getting smacked around by quick sellers, smooth agents and dodgy developers and hopefully they encounter non of these, because there are some really good guys out there. Keep in touch
10 points that you have made here is..very interesting. i did get good amount information from here.
5 point "Taxes/Penalties"..is the most interesting i did get it from here. thanks for sharing your this post and keep posting such post here in future too.
Newbuy
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