Invest / Bond / ... ?

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iDOL

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Greetings Folks,

I know it would be best to consult a professional around this, to assist in helping me make a more informed decision.

Right now seen as I am in the early stages of a very convoluted process that will take place over the next 6-8 months, I thought I would put it out there and just see if there's different insights that I can draw from this.

Background to this, we're a family of 4(Mr & Mrs - Mrs is also taking some timeout due to a retrenchment - but we've always been a single income household), my teenage son in final year(2016) of school and my daughter who is currently in primary school.

I will provide my options that I believe I have available to me. After this period (6-8 months from today), I will have roughly R 1 000 000.00 (proceeds, from selling 3 rental properties and primary residence + settling bond) in my bank account, totally unencumbered and no home.

Now I would like to gauge some opinions the most recommended options :

- Use the full amount to Invest it and apply for a Bond to purchase a property. My intention is to focus on purchasing a property in the Northern Suburbs of Jhb - hoping to sell this property to finance any future retirement plans.

- Use the full amount to purchase a property and reducing the amount which I need to apply for a Bond.

- Use the full amount to purchase a property as a home, without the need for a Bond. Position 0

I will be selling off a number of properties, in areas with not a lot of scope for massive growth in the future - so I am selling these off hoping to find a better use for the cash.

I also won't have any other Debts - I am starting from position 0 - (Bond(depending on choices)/Car Finance or Credit Card Debt). My only financial commitments are, providing for the family and their everyday needs and paying for the other associated services, such telephone and internet bills.
 
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Your age is around 40 I guess?

My opinion depends on the interest rate you will get for your new residence.

If you get 9% home loan or under, use 20% of the money as a deposit on the property (now don't go buy a fancier property because of that) and for fees, and invest 80% in a good mix of unit trusts.
 
supersunbird said:
Your age is around 40 I guess?

My opinion depends on the interest rate you will get for your new residence.

If you get 9% home loan or under, use 20% of the money as a deposit on the property (now don't go buy a fancier property because of that) and for fees, and invest 80% in a good mix of unit trusts.
Click to expand...

On the money in terms of age, thank you very much for the input.

Right now I would be able to obtain a rate of 9% or less. Due to low level of financial commitments and credit history.
 
iDOL said:
On the money in terms of age, thank you very much for the input.

Right now I would be able to obtain a rate of 9% or less. Due to low level of financial commitments and credit history.
Click to expand...

The reason the interest rate is important: The higher the interest rate on the home loan, the less difference there is between what you can get investing in unit trusts rather than paying cash on the home

The reason your age is important: You still have 20 to 25 years to retirement. You will have finished paying the bond off and can then sell it cleanly for the price you want. If you can pay off the home loan sooner than that, in say 10 years, even better. Your invested lumpsum of R800 000ish would also grow nicely over that period, just don't spend it on anything else.

Still important to save part of your current income for retirement, either through an employers retirement fund and if not available, a unit trust Retirement Annuity (RA). Maybe you can even put a part of your lumpsum in there (its then protected from yourself and other creditors), but best speak to a financial advisor about that an the best way to work it into an RA, since it would be after tax money and you need to get the best tax benefit from it.
 
My 2c: Buy the "best" house you can afford in the best area. With future needs in mind. e.g. near a good high school and university. Near work if also possible. Once you buy a house, you are pretty much stuck with it for 8 years if you want to break even on a bond with no deposit. Also, it is tragic to waste R100 000+ on transfer duty, estate agents fees, bond registration fees etc. just because you need to move again in a few years time.

Secondly, how secure is your job? I am sorry to hear your wife went through a rentrenchment - it is incredibly taxing on the family and the soul of the person affected. The reason I ask is because having a paid off house is a feeling I cannot describe. No matter what, I have a roof over my head. I can always beg and borrow a few grand here and there from family for water and electricity and some food, but would never be able to find R10 000 a month in hard times. So there is value in having a paid off or "mostly" paid off house. I would still get the largest bond possible at a low interest rate, then get an access bond facility so you can put all your extra money in there. Rather than commit upfront with a huge deposit. In tough times, you can always live off your excess in the access bond and still "pay the monthly bond" from the money in the bond (it's a little strange, but it can work).
 
Thank you for that. I do have a firm understanding around those concepts.

supersunbird said:
The reason the interest rate is important: The higher the interest rate on the home loan, the less difference there is between what you can get investing in unit trusts rather than paying cash on the home

The reason your age is important: You still have 20 to 25 years to retirement. You will have finished paying the bond off and can then sell it cleanly for the price you want. If you can pay off the home loan sooner than that, in say 10 years, even better. Your invested lumpsum of R800 000ish would also grow nicely over that period, just don't spend it on anything else.

Still important to save part of your current income for retirement, either through an employers retirement fund and if not available, a unit trust Retirement Annuity (RA). Maybe you can even put a part of your lumpsum in there (its then protected from yourself and other creditors), but best speak to a financial advisor about that an the best way to work it into an RA, since it would be after tax money and you need to get the best tax benefit from it.
Click to expand...
 
My current property that I reside in I purchased cash and I will be utilising the proceeds from the sale to fund part of the amount mentioned above.

Work situation, I am at a fairly stable financial institution. Job prospects are great as well, I do have a number of opportunities - so that's not a problem. But yes, one can't account for massive changes.

Gaz{M} said:
My 2c: Buy the "best" house you can afford in the best area. With future needs in mind. e.g. near a good high school and university. Near work if also possible. Once you buy a house, you are pretty much stuck with it for 8 years if you want to break even on a bond with no deposit. Also, it is tragic to waste R100 000+ on transfer duty, estate agents fees, bond registration fees etc. just because you need to move again in a few years time.

Secondly, how secure is your job? I am sorry to hear your wife went through a rentrenchment - it is incredibly taxing on the family and the soul of the person affected. The reason I ask is because having a paid off house is a feeling I cannot describe. No matter what, I have a roof over my head. I can always beg and borrow a few grand here and there from family for water and electricity and some food, but would never be able to find R10 000 a month in hard times. So there is value in having a paid off or "mostly" paid off house. I would still get the largest bond possible at a low interest rate, then get an access bond facility so you can put all your extra money in there. Rather than commit upfront with a huge deposit. In tough times, you can always live off your excess in the access bond and still "pay the monthly bond" from the money in the bond (it's a little strange, but it can work).
Click to expand...
 
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