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Thread: Property Development - Making money with property

  1. #1
    Grandmaster Velenoso's Avatar
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    Default Property Development - Making money with property

    Ok, so here we go. This is a thread for anyone who is interested in making money with property.

    Edit: IzZzy's PM has had to be removed

    Hope you guys don't mind, in the interest of time, I'm going to steal from some of my older posts on the forum.

    My advice to someone starting out would be the following:

    1. By any means possible, buy your first property as soon as possible.
    2. If at all possible, do not move into your first property. (someone gave advice about buying with some friends - good advice)
    3. Buy the most run down property in the best area that you can afford.
    4. Invest a little money to renovate the house and sell it for a profit.

    This way, with a little luck, you can kill half your bond for your next house with the profit from the first. Granted, not everybody wants to do this as a business, but it's a great way to cut your bond for your second property (the one you move into) in half.

    Let me give you an example of one I did last year.

    Bought a property in a newly built golf estate for R 1,400,000 at roughly R 15,000 a month. I invested R 200,000 to add two more bedrooms and a few other things. I sold the property for R 2,100,000 two months ago. About six months after I bought it.

    Result: R 500,000 - R 90,000 paid for bond for six months. I made a profit of about R 400,000

    So, if you're looking to buy a house for R 800,000 to a million, you can pay half in cash and take out a much smaller bond...

    __________________________________________________ __________________________________________________ ___________

    That's right. Bought my first property in March 1999. I first came here in 1998 on holiday (was doing some work in Kinshasa). I loved it here and decided to come back. A good friend of mine also came over (he's from Australia) and we bought a property. (And started a few other businesses). We both still live and work here.

    (Bear in mind though, I was earning US$ at the time which made it a lot easier to afford a property at the age of 18, but it's not impossible. It's actually quite feasible for a single guy earning over R 20,000 a month)

    South African people seem to be afraid to buy property at a young age. This is understandable because they don't want debt but if you approach property as a business, it can be the most profitable thing you ever do.

    Don't get me wrong, there are some risks with property, but it is VERY unlikely that you will lose money. The worst that can happen is that you wont make any.

    __________________________________________________ __________________________________________________ ___________


    for renovation / building purposes I would definitely suggest a house / cluster. Also there are huge profits in building from scratch. (probably not the best idea for first time buyers though)

    It's difficult to rent out a place for the price of your monthly loan repayment, never mind for a profit. The only way that making an income from rent is feasible is if you own the property.

    It may be a good idea to get a tenant in who would be willing to cut a deal with you. (i.e. pay half the bond on the condition that he doesn't mind staying in one half of the house while the other is under construction, etc.) This would save you quite a bit of money while you renovate the property.

    This should be enough to get the conversation started. I recommend reading this thread http://mybroadband.co.za/vb/showthread.php?t=81357 . In addition to mine, there is some good info there.

    Picard, to answer your question:

    How does your support structure look. Legal staff, secretarial, partners ... in a venture such as land developement?
    What does one need to engage in something like property developement. Becuase property developement in SA is only just someway along its route. It still has a long way to go and has many more oppertunities waiting.

    __________________________________________________ __________________________________________________ ___________


    I'm a very hands on sort of guy. I like dealing with people myself. I deal with several very competent companies for the various things you describe. I have an excellent property attorney, land surveyor, etc who handle a lot of the legal aspects of my business. I have a good contact at the council. I don't particularly like dealing with estate agents, but I quite often do. I work with a number of agencies, depending on which area I'm building/working in.

    Ok, so I think that is a good start.
    Last edited by Velenoso; 22-04-2008 at 09:19 AM. Reason: Had to remove references to PM

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    Just a quick question...

    You mention the profit on the one property of R400,000. My query is what about all the costs associated with purchasing that property? Transfer duty and fees, bond registration fees should probably be around R100,000 (or not as high, as I was only able to find the costs on a R2,000,000 property in the little time I had to "research" so reduced these ).

    Another risk you run in the current market of course is not being able to find a buyer. The risks you run in assuming you will immediately find a buyer can lead to difficulties with people who will battle to service the bond themselves.

    Yet another problem of course is the NCA. If the banks do their job you may find it difficult to get the finance to buy the property and then still raise the R200,000 to do the renovations. First time homeowners may get 108% bonds but even this would not leave money to renovate.

    Just some things that come to mind when I read this....
    Last edited by LancelotSA; 21-04-2008 at 07:43 PM.

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    Very very good opening post there. I'm also young having started my first job about a month and a half ago and I'm definitely looking into buying some property or making some off the property market.

    Firstly, I'm a bit off the benchmark you stated of R20k a month salary but still, how on earth can the average joe afford properties nowadays? You can get a decent place to live for a mil but what do you pay on it monthly if you don't have anything to put down on the house upfront? I can't just give up my entire salary on a bond.

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    Quote Originally Posted by feo View Post
    Very very good opening post there. I'm also young having started my first job about a month and a half ago and I'm definitely looking into buying some property or making some off the property market.

    Firstly, I'm a bit off the benchmark you stated of R20k a month salary but still, how on earth can the average joe afford properties nowadays? You can get a decent place to live for a mil but what do you pay on it monthly if you don't have anything to put down on the house upfront? I can't just give up my entire salary on a bond.
    Just over R13,000 at a 15% interest rate over 20 years.... and then don't forget the good old rates!

  5. #5

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    Awesome thread!

    I just read the thread you linked to, I had forgotten my involvement in that thread!

    I understand the fundamentals to this business. My issue is -my- first step. As of next year I will be in JHB living by myself. As BobbyMac correctly pointed out - research is everything. In my case it is impossible since I have no clue about JHB.

    I'm sitting here thinking just what is my first step? Last thing I want to do is sign a x long lease and be stuck with my development plans as I'm tied to a lease. My problem, highlighted by myself in the other thread :P, was not how does one afford to -buy- a property, but how does one buy a property and renovate it, whilst still living somewhere.

    From what I see, my gameplan is rent for like 6months next year while looking for any property I can buy in my limited price range. If I can afford the run-down place - live in it/renovate it and try sell it at a profit. After it's sold I rent for a while, whilst looking for another property. Repeat process.

    Velenoso - I wish you ran a "Spend the Day with me in the business" programme

    Hey feo - wanna go halvies on development? :P

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    Lancelot, that example was a very rough idea of the possibilities to make large sums of money. There are transfer duties, etc. Keep this in mind always, banks are people too, they are people running a business, you can ALWAYS negotiate with them. These days I can pretty much get finance for a property over the phone, so go speak to them. Ask them for 150% bond and see what they say! Negotiate your interest rate, etc. Most people make the mistake of believing that banks won't budge. If they feel that they will lose you as a client, they will come to the table.

    feo, R 20,000 was just a number I pulled out thin air. Whatever your income is, you can make some kind of plan to get a property. If you can not afford a R 500,000 place or similar, then consider going in with a friend(s) like I did. It can turn out into a fun project if you all work on it, it's easier on the budget and you all split the profits. Also you can get a much better (more expensive) property this way.

    IzZzy, you're coming up to JNB in June right? When you're up here, buy the paper and start looking. You'll get a good feeling what what costs what in what area. Look, it's not the end of the world to live in the place while renovating. If you're a single guy, then no worries. It might not be as easy for someone with a wife/kids, etc to have them living in a construction site. Your game plan is a good one, I'm sure you'll find somewhere where you can rent on a six month or a month to month basis. Then take your time, go to show days, familiarize yourself with the market. Don't rush into a property, if it takes you six months to find the right one, so be it... Don't worry, you get faster with time.

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    did someone forget that a house is a roof over your head, and not a piggy bank?

    sorry, but i detest people who flip properties for a living.

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    Quote Originally Posted by BiteMe View Post
    did someone forget that a house is a roof over your head, and not a piggy bank?

    sorry, but i detest people who flip properties for a living.
    It's business. If you don't like it, bite me.

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    Quote Originally Posted by mercurial View Post
    It's business. If you don't like it, bite me.
    yeah, i know, and we all gotta eat.
    i'm going to stay well away from this thread from now on, because it'll just get me totally upset:-) i know it is easy to make money on this, but the long term effects of everyone doing it creates a heck of a lot more problems. i'm living in it right now, and so will my offspring.

    imagine, in 20 years time, having to turn around to your kid and saying
    "johnny, i know the best you can afford now is a 1 bed flat in diepsloot, and i know you need to inflate your salary on the mortgage forms to be able to afford it, even though you are a doctor, but it is all my fault...see buddy, when i was your age we all started to treat our houses like ATM's"

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    Quote Originally Posted by BiteMe View Post
    yeah, i know, and we all gotta eat.
    i'm going to stay well away from this thread from now on, because it'll just get me totally upset:-) i know it is easy to make money on this, but the long term effects of everyone doing it creates a heck of a lot more problems. i'm living in it right now, and so will my offspring.

    imagine, in 20 years time, having to turn around to your kid and saying
    "johnny, i know the best you can afford now is a 1 bed flat in diepsloot, and i know you need to inflate your salary on the mortgage forms to be able to afford it, even though you are a doctor, but it is all my fault...see buddy, when i was your age we all started to treat our houses like ATM's"
    That's a rather drastic vision. The father would obviously make sure his offspring has houses, especially since he is making millions from this business.

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    Quote Originally Posted by BiteMe View Post
    did someone forget that a house is a roof over your head, and not a piggy bank?

    sorry, but i detest people who flip properties for a living.
    Why? Do you hate people who flip burgers for a living too? 'cause food is made for eating you know...

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    Quote Originally Posted by Velenoso View Post
    feo, R 20,000 was just a number I pulled out thin air. Whatever your income is, you can make some kind of plan to get a property. If you can not afford a R 500,000 place or similar, then consider going in with a friend(s) like I did. It can turn out into a fun project if you all work on it, it's easier on the budget and you all split the profits. Also you can get a much better (more expensive) property this way.
    I earn peanuts, I earn R8 K a month and I am seriously thinking of getting into the property market, but I think the only way for me to do that is to go into it with a friend, put our money together and split the profits after selling a property. I really wonder if it is possible for me to start with maybe a low cost house, you know start small, then I'll work myself up and maybe after 5 years or so I'l have enough cash saved to buy properties that run into the millions. Do you think it's possible for a guy like me earning R8 K can get into the property market? Have you seen someone or some people do it before?

    P.S. In 2 or 3 years time, my salary will be double than what I am getting now.

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    Quote Originally Posted by BiteMe View Post
    did someone forget that a house is a roof over your head, and not a piggy bank?

    sorry, but i detest people who flip properties for a living.
    I detest a man who tries to tell another man how to make a living. It's close minded people such as yourself who will never gain financial independence and will forever rely on their paycheck to survive.

    If you don't have something useful to contribute or a question that you need answered then don't day anything at all.

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    Quote Originally Posted by BiteMe View Post
    did someone forget that a house is a roof over your head, and not a piggy bank?

    sorry, but i detest people who flip properties for a living.
    Why? Property is one of the best investments around. Yes a house is a roof over your head which is why there'll always be demand for property, and limited supply, especially in the good areas.

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    Quote Originally Posted by Velenoso View Post
    I detest a man who tries to tell another man how to make a living. It's close minded people such as yourself who will never gain financial independence and will forever rely on their paycheck to survive.

    If you don't have something useful to contribute or a question that you need answered then don't day anything at all.
    Unfortunately 90+% of the whole world's population has a mindset like that. That's why we have less than 10% wealthy people in this world.
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