Home Buying

[swsup97]

There's your problem. You've read tons but not actually talking to people who rent properties out for money.

My bond rounded up is R4800.00 per month. Levies, rates and taxes rounded up R1100.00 per month. So that's R5900.00 running costs and rent is R6000.00 per month. The tenant pays for their own electricity usage. There is minimal to no maintenance required as it's a complex unit and anything that breaks is for the tenant to replace unless it's obvious wear and tear.

The unit is a ground floor 2 bedroom, 2 bathroom with a garden in Honeydew. Many people in the same complex rent their units out for R7000+ per month.

Does your unit come with a carport or single/double garage ?

 

[SauRoNZA]

I think passing on an appreciating asset to your children is a good investment.

Creation of generational wealth has to start somewhere.

I still don't understand the relevance.

Then the cheaper you buy the better so that your children get a bought and paid for property and not the mass of debt that you over exposed yourself to by going to large.

 

[StrontiumDog]

@^^vampire^^ , what area are you in again?

 

[Dolby]

You should be able to pay at least twice the bond

In month 1 or month 120?

 

[Jweb_@@]

Residential property is not an easy and stress free investment that realtors make it out be be. You need to do thorough research. You need to now the area, the true cost of ownership(renovations, maintenance,taxes,etc). Then you also need to consider the type of people who typically move into an area, and also the people who currently live there. Are they aged, young families, single professionals, etc. Then you need to somehow figure out the type of residence that would typically be in demand, 3 bed house, 2 bed flat, gated estate, etc.

There's alot more things to consider, but once you've got a good grasp of all the dynamics, you can purchase a property that will outperform the typical 2 bed townhouse that most people prefer to buy.

On the topic of renting vs buying, buying definitely provides more stability, especially if you have kids. If you own a house, and something happens that brings you within an inch of insolvency, you'll still have a roof over your head. You can explain your situation to the bank and they will, within reason, give you some options that can assist you.

Your landlord on the other hand will not be as forgiving.

 

[^^vampire^^]

Does your unit come with a carport or single/double garage ?

Double carport.

 

[^^vampire^^]

In month 1 or month 120?

Sorry, meant you should be able to cover twice the monthly amount for the bond. So if your repayment is R5000 per month you should be paying R10 000.00 to decrease the term.

 

[^^vampire^^]

@^^vampire^^ , what area are you in again?

Honeydew.

 

[^^vampire^^]

I suspect your outstanding bond is only around 40%-60% of the property value, which is why the rent is able to cover the bond+expenses. A new home owner would be paying a bond at 90%-100% of the property value (depending on the deposit) and therefore end up paying more than the rent for an equivalent property.

Outstanding bond amount is roughly 95+%, Only been paying off the bond for a little over a year. Regardless the repayment amount of the bond has only gone up over the last year. Total purchase price was R619k. Put down R75k. Bond amount R544k. Repayment just under R5k per month.

Regardless if I didn't put down the deposit my bond repayment + levies, rates and taxes would be R7000. If I wasn't in a hurry to get a tenant I would have gotten someone paying R7000 a month like a lot of others in the same complex have and still covered all expenses.

 

[StrontiumDog]

Perhaps I'm oversimplifying it but surely it's just supply and demand at play here. If the area you're in has high rental amount vs house price then generally speaking, people would rather rent there than be tied down to owning there.

Speaking from a Cape Town perspective, if the rental return is good compared to the property value, it is usually a less desirable area to own in, I think perhaps due to the long term potential of capital growth.

So in a highly desirable area, you get the buy-to-let investors and buy-to-flip investors driving up the prices of the properties, but then the rentals can barely keep pace with that increase and hence your rental return stays around 7 or 8 % p.a. of property value. You would need a rental return of around 12% p.a. to cover your bond repayment + expenses on a 100% bond.

My 2 cents based on my limited knowledge (and very rough calculations) of certain Cape Town suburbs...

 

[RoboJedi]

Hi Guys,

My wife and I are looking to buying our 1st home next week.

I recently read http://businesstech.co.za/news/general/78063/a-guide-to-buying-a-home-in-sa-in-2015/ which was a great source of info. One thing we dont have is a deposit. Is a deposit something you HAVE to have? I heard that 1st time buyers can sometimes get a 100% bond? would this include some sort of deposit or am i looking at it all wrong?

Thanks

Busy selling our second house, I think I will rent for 3 to 6 months while I search for our "hopefully" final family home. Will any case reference this thread

 

[scienide]

1 thing I would say if have at least R70k + one side. Call it a deposit or what ever. Transfer duties, lawyer fees etc does not get included in the bond amount, so you Wil be liable for it

 

[Neo_X]

I see my question has had quite a few people talking. Crunched a few numbers, keeping house price at inflation, comparing a few scenarios over a period of 20 years, paying homeloans at normal intervals.

Scenario 1 :
Stay in current property(700k value).
Invest remaining cash(R5500) in a stable performing stock (i selected Satrix INDI -it performed 19% annualized over the last 10 years, although there is better)

Scenario 2:
Buy new property (roughly 1.2bar), and move there
rent out current property
invest remaining cash(R500)

Scenario 3:
buy new property, and rent it out
Say in current property
invest remaining cash(R3500)

Scenario 4 :
Sell current, rent for 20 years
invest remaining cash(R8500)
buy property cash after 20 years.




That is summarized scenario's - i did try and get inflation down in all my calculations etc.Rough calculations is Linked(sorry yes its a mess)


But in summary:
Scenario 1 was the winner, with a portfolio value of 40.7 milj

Scenario 4 was very similar, with a portfolio value of 40.8 milj (just keep in mind the negative side of renting - possible problematic landlords etc etc - not my favourite idea :/

Scenario 3 was next in line, 26% down at a portfolio value of 29.8milj

Scenario 2 was the worst, 51% down at a portfolio value of 19.8Milj


But yes, that is just my biased opinion. I will certainly not invest my cash into a asset that only keeps up with inflation- when i'm 65 i don't plant to start chewing on the brick walls, and look at the 4 empty rooms.

 

[StrontiumDog]

Bloody hell, since you put it that way Neo_X No wonder there are so many articles against property as an investment vehicle!

 

[krycor]

I see my question has had quite a few people talking. Crunched a few numbers, keeping house price at inflation, comparing a few scenarios over a period of 20 years, paying homeloans at normal intervals.

Scenario 1 :
Stay in current property(700k value).
Invest remaining cash(R5500) in a stable performing stock (i selected Satrix INDI -it performed 19% annualized over the last 10 years, although there is better)

Scenario 2:
Buy new property (roughly 1.2bar), and move there
rent out current property
invest remaining cash(R500)

Scenario 3:
buy new property, and rent it out
Say in current property
invest remaining cash(R3500)

Scenario 4 :
Sell current, rent for 20 years
invest remaining cash(R8500)
buy property cash after 20 years.




That is summarized scenario's - i did try and get inflation down in all my calculations etc.Rough calculations is Linked(sorry yes its a mess)


But in summary:
Scenario 1 was the winner, with a portfolio value of 40.7 milj

Scenario 4 was very similar, with a portfolio value of 40.8 milj (just keep in mind the negative side of renting - possible problematic landlords etc etc - not my favourite idea :/

Scenario 3 was next in line, 26% down at a portfolio value of 29.8milj

Scenario 2 was the worst, 51% down at a portfolio value of 19.8Milj


But yes, that is just my biased opinion. I will certainly not invest my cash into a asset that only keeps up with inflation- when i'm 65 i don't plant to start chewing on the brick walls, and look at the 4 empty rooms.

Ah so renting doesnt make a too much of a difference vs buying residence

 

[Neo_X]

Ah so renting doesnt make a too much of a difference vs buying residence

If the landlords stick with inflation increases only.
but i have heard stories for both sides of the coin - eg where some landlords doesn't mind to keep the rent the same for a few years, and where other ones likes to push it up 10% even.
but renting does give you the flexibility to shop around, but then it becomes technical, as every move will have transportation costs, and possible knock's on your deposits.
I based my calculations on a 8% average rent increase over the next 20years (starting a 7k and ending at a gobsmacking 30k per month....). Same percentage increase was applied to income and other expenses - yes i know - the world is never perfect, but why not take some risk.

 

[reactor_sa]

We will get to a point in SA, where it will be cheaper to buy a house in the UK.

 

[marco79]

Ah so renting doesnt make a too much of a difference vs buying residence

Only if you put the savings (difference between rental & bond) into an inflation beating investment.

 

[ToxicBunny]

We will get to a point in SA, where it will be cheaper to buy a house in the UK.

We are a very very long way from that point.