Houses...where does one begin?

[Leo876]

Hi

After reading all the threats on financial well-being I thought maybe I could get some insight on an idea I've been playing around with. I'm considering making my first big purchase and I would like it to be property. I'm currently 24 and earn a semi-decent salary or atleast what I think qualifies as semi-decent. Ideally I would like to rent the property for the first two years and contribute any additional income I have to this. The only problem is that I'm not sure where to start and how the whole process would work. The prices of properties also seems somewhat high and I wont really know if I'll be getting any value for my hard earned money. I know this tread might be abit vague but I appreciate any useful info

 

[Hamster]

Are you going to stay/work in a specific area for the next 4-5 years? If you need to move to a new town or area renting is way easier and hassle free, especially when you are young. You also do not need to deal with taxes, levies and repair/maintenance costs.

If you do buy though make sure you can still afford it if the interest rate rises. It's been quite low for years so they might raise it one of these days.

And also try and pay it off ASAP to get the total interest and overall cost down (you are gonna live poor in you early 20's).


As for where to start - go to a bank's website and use their affordability calculators and do some sums. Then go to a bank and get a pre-approved loan (I think thats what it is called) and then go look at houses

 

[SauRoNZA]

Don't buy a property as an "investment" unless you can pay 150% or more of the instalments on the purchase price.

The process is rather easy though.

Go driving around on a Sunday popping in at show houses you fancy (for important for a place you want to live in yourself) or trawl through newspapers and property ads and websites.

Better yet find a new development going up soon so you can get in cheap and also dodge the transfer costs.

Prepare yourself to field a million calls and a million emails from estate agents. I recommend finding one that you would like to deal with and lying to the rest about your contact details.

When you find the place you want you put in an offer with the estate agent. You can negotiate their commission if you really want to play hard ball but I find making super low offers is the best place to start. You can only go up from super low so there's no loss to you other than a bit of time. Also if you don't absolutely have to have the properly in question you also don't need to push the price beyond your means.

Choose the maximum price you can way before ever starting to shop and never cross that line.

When an offer is accepted the estate agent will probably start talking to the banks on your behalf. You can also go direct and strike your own deals or use a company like Ooba to do the work for you.

Expect more phone calls and paperwork.

Once the bank approves you for the loan the ball really starts rolling.


Prepare to have a heart attack in paying lawyer's fees and transfer costs (if any), depending on the cost of the property.

Once that's paid for it's a done deal. Prepare to start paying the instalments.

 

[bromster]

Just a tip if you buy from the developer. They always attract you with "No Transfer Fees", but their advertised prices almost always exclude VAT, which you must pay on top of the purchase price.

 

[Leo876]

Thanks for all the advice.

 

[Freshy-ZN]

If I was your age I would rent for the next 10-15 years. Most areas the rental for a house is thousands less than what it would cost to pay off a mortgage on the very same property.

Why not rent and save the difference into an account that is semi- difficult to access? Then one day you can put down one heck of a deposit and save yourself a lot of money in the long term.

The benefits are you don't have to worry about home maintenance etc which is something people often don't comprehend in terms of cost.

 

[Sinbad]

Terrible advice. Buy. Renting is pouring money into a black hole.

 

[Chevron]

If I was your age I would rent for the next 10-15 years. Most areas the rental for a house is thousands less than what it would cost to pay off a mortgage on the very same property.

Why not rent and save the difference into an account that is semi- difficult to access? Then one day you can put down one heck of a deposit and save yourself a lot of money in the long term.

The benefits are you don't have to worry about home maintenance etc which is something people often don't comprehend in terms of cost.

As was said, terrible advice.

Rent goes up every year, while house payments stay the same. In 5 years the rent will be more than house payments.

 

[ToxicBunny]

Absolutely terrible advice to rent... if you can afford to buy and it makes sense to buy a property, do so. Make the sacrifices required for the first 2 years, things get easier as the bond becomes less of a chunk of your salary...

My only advice is buy small (like a 2 bed apartment or something), and pay it off as quickly as you can.. then buy a townhouse/house, and don't sell the apartment. Its one of my biggest mistakes in the property game, I stayed out of it until I could afford a house and now I regret not buying a flat or a little 2 bed place somewhere that would now be paid off and generating me rental income.

 

[BlackMamba]

Renting is a worse advice ever, buy now as you still young so by the time at 40 you will be free. pay up the house as quick as u can

 

[SauRoNZA]

If I was your age I would rent for the next 10-15 years. Most areas the rental for a house is thousands less than what it would cost to pay off a mortgage on the very same property.

Why not rent and save the difference into an account that is semi- difficult to access? Then one day you can put down one heck of a deposit and save yourself a lot of money in the long term.

The benefits are you don't have to worry about home maintenance etc which is something people often don't comprehend in terms of cost.

Three years in my installments are a thousand rand less than the exact same place next door.

Granted I overpay my installment, but even if you don't the monthly costs can be very close especially if you had deposit.

However in certain situations with certain lifestyle requirements it can make just as much sense to rent as it does to buy if you put the same amount of money away. This normally only applies if you have extra and would have overpaid the installment anyway.

 

[Other Pineapple Smurf]

If I was your age I would rent for the next 10-15 years. Most areas the rental for a house is thousands less than what it would cost to pay off a mortgage on the very same property.

Why not rent and save the difference into an account that is semi- difficult to access? Then one day you can put down one heck of a deposit and save yourself a lot of money in the long term.

The benefits are you don't have to worry about home maintenance etc which is something people often don't comprehend in terms of cost.

-1 x 1000

@OP ignore this guys advice, its terrible. Now is the time to buy, NOW, not tomorrow, not next year, not next decade, but NOW!!!

I'm 38 and I've just bought my first property as the market is the best its been in years for buyers. Only a seller will tell you to rent.

I just bought a R1.1million 3 bedroom house for R730K in Somerset West in a popular suburb. A year ago I would have gotten a 2 bedroom place if I was lucky. Just last week a good mate was telling me how he has already lost R150K on his investment house he bought 4 years ago, that's how suppressed the market is and we won't see this for many more years to come.

I envy you that you can do in your 20's what I'm doing my 30's. So go for it!!!

 

[ToxicBunny]

Is the property market that bad in the Cape?

I bought my house 2.5 years ago, and I've already made R100k on the property...

 

[Other Pineapple Smurf]

Absolutely terrible advice to rent... if you can afford to buy and it makes sense to buy a property, do so. Make the sacrifices required for the first 2 years, things get easier as the bond becomes less of a chunk of your salary...

My only advice is buy small (like a 2 bed apartment or something), and pay it off as quickly as you can.. then buy a townhouse/house, and don't sell the apartment. Its one of my biggest mistakes in the property game, I stayed out of it until I could afford a house and now I regret not buying a flat or a little 2 bed place somewhere that would now be paid off and generating me rental income.

Agree 100%

 

[Other Pineapple Smurf]

Is the property market that bad in the Cape?

I bought my house 2.5 years ago, and I've already made R100k on the property...

Its not a sellers market at all, not at all. We saw lots of bargins during our house hunt.

The only property we saw that was on the up where your entry level sub R500K houses as its easier to get a 104% bond. Recent market speculation is your > R1.5 million market is still going to see a decline till at least end of next year.

 

[ToxicBunny]

Its not a sellers market at all, not at all. We saw lots of bargins during our house hunt.

The only property we saw that was on the up where your entry level sub R500K houses as its easier to get a 104% bond. Recent market speculation is your > R1.5 million market is still going to see a decline till at least end of next year.

Interesting, its a very different kettle of fish in Durban it seems... the market up to about R1.2m is pretty steady in terms of growth, beyond that to the R5m range is where the issue lies in terms of growth atm.

 

[Other Pineapple Smurf]

Interesting, its a very different kettle of fish in Durban it seems... the market up to about R1.2m is pretty steady in terms of growth, beyond that to the R5m range is where the issue lies in terms of growth atm.

Thats the thing with property, you never know where it will go so you always have to treat it as a long term investment and not short term.

 

[Other Pineapple Smurf]

@OP when looking at houses / flats etc, look at the worst dump in the neighourhood. Best piece of advice I followed. You will often find (but not always) that the difference between this place and the neighbours is much more than what it would cost to fix it up. Thats what we did and why we got such a bargain.

It also allows you to buy something bigger and you can stay there for longer before you outgrow it. You could even rent out any extra rooms to help you pay off the property quicker.

 

[ToxicBunny]

Agree on the above...

Just thinking about my brother, he bought a place in CPT (Can't remember where).. but the house was a dump, geyser didn't work, plumbing was not 100's, kitchen was barely functional etc etc... He picked it up for just shy of R1m..... houses in the area are going for R2.5m and upwards...

 

[Freshy-ZN]

Before everyone summarily discounts my 2c, think about it a bit further.

Two examples:

I owned a house in Waterfall, upper Highway area, Durban. I had no bond. I would have gotten R6000 rent a month but I sold the house for R1million. The person who bought the house had to take out a bond for say R900 000. That's monthly repayments of what, about R9000 a month? Then there's R550 for rates and lets assume R1000 a month average for maintenance. So for the privilege of owning the house they now pay R10 550 a month for something they could have rented for R6000. That's R4000 a month to play with.

A friend who had just finished studying in Pretoria bought a house a few years ago. She then moved to Durban due to work. She is an engineer. She currently pays R8000 a month on her bond plus rates but rents it out for R5000 a month. Then she's still liable for repairs and maintenance. That's over R3000 shy a month. Now in Durban she has to rent for another R4000 a month.

Why not take the (probably) R3000 a month you could save by renting and put that towards a large deposit in 10 years?

People keep saying buy your own, I made R150 000 in 3 years. Did you? You will pay 3 to 4 times the purchase price of a bought house over the term of you loan. Yes you can pay in extra and save on the interest but in my humble opinion you don't make money if you own 1 house. No matter what profit you think you made when you sell, it's irrelevant. You are always moving sideways in the market. If your house value grew by 20% then the one you have to buy when you sell likely also grew by the same. Where have you made a profit?

Of course there are a few exceptions. I bought another property for R400 000 and sold it for R3,5 million 4 years later. In some areas I'm sure the disparity between rental and bond repayments are negligible I'm sure.

To those who say renting is making the landlord rich- buying on 90% bond is making the banks rich. Saving R3000 plus per month is making you rich.