Offer to purchase question

[RonSwanson]

So true! Did my taxes.... a nice R120k refund for making “losses”.

Its a nice payday for being a landlord!

It's definitely not nice being a landlord, with multiple properties it's a full-time job. But you are right, there are some perks if you are astute.

 

[Thor]

It's definitely not nice being a landlord, with multiple properties it's a full-time job. But you are right, there are some perks if you are astute.

Is it really though?

Rawson takes care of everything for me.

Billing, paying obligations.

Evictions, lawsuits the works.

Its completely hands off.

 

[RonSwanson]

Is it really though?

Rawson takes care of everything for me.

Billing, paying obligations.

Evictions, lawsuits the works.

Its completely hands off.

Sounds like you are batting on a good wicket. In my experience they take a fair cut of the profits though, which is OK when you are in a position to absorb it (+- 5+ years in). The key is to make minimal profit in order to reduce income and inevitable SARS taxation. It needs careful management.

Then there's the (preferred) maintenance contractors who can pull you a new one. Things like charging R1500 -R2000 to replace a tap washer and R3500 - R5000 for a toilet bowl seal. If you are not hands-on, inspecting and making sure of the required maintenance, then you will lose. I am not even talking about small things like plug & light switch replacement, door hinge adjustment and sticky locks.

Another thing is renovations: After 8-10 years, the kitchen, bathrooms and lighting (at the very least) will be dated by contemporary standards and not be up to snuff with the latest and greatest demands of the rental community. This can be costly, and renovation expenses need to be juggled with rental payments, booking factors, and availability.

The first few years are key: Don't make any profits, because SARS will take their cut. Rather declare a loss. 5-10 years, record marginal profits. 10-15 years, do minor renovations, minimal profits again. Last 13 - 18 years, do major renovations, once again minimal profits. All of the time, balance your renovation decisions with perceived market value. It's a mistake putting porcelain tiles / solar electricity into a home in Thembisa, or a pizza oven into a home in Soshanguve. Bryanston / Kyalami perhaps yes, dependent on demographic and demand.

Managing 8+ properties is no joke, rest assured that the landlord will work a full day (and night) sometimes. Agents can assist, but their objectives are not aligned with your available cashflow and long-term objectives. Then there is the inevitable BC/HOA kak, because tenants are humans and after consuming a few Black Labels cause domestic violence, destroy the clubhouse toilets in a hormone-driven sexual orgy, party on top of the floodlights, break / damage others' homes, destroy the guardhouse CCTV screens, drive lightpoles over because they cannot park, and make poor decisions on where they decide to do Number One and Number Two (in the strangest places) on the common property.

Tenants and their kak are a fulltime job.

 

[Mike Hoxbig]

Sounds like you are batting on a good wicket. In my experience they take a fair cut of the profits though, which is OK when you are in a position to absorb it (+- 5+ years in). The key is to make minimal profit in order to reduce income and inevitable SARS taxation. It needs careful management.

I personally don't see the point in delaying your profits to avoid paying SARS more. You're kind of spiting yourself, not just them. It's kind of like taking a lower paying job to avoid paying more tax. In a higher paying job, your tax is more, but so is your nett income.

Money in your pocket now, is money that you can use right now. Possibly towards buying and paying off another property sooner.

On a 10k rental, after agents fees, levies, rates etc. You're looking at tax on about 6k, which at 40%, you'll take home R3,600. Whereas on a bond of 1m and a repayment of 7k + life insurance, most of your repayment is going towards interest, and you're not taking home much.

The choice basically comes down to paying SARS or paying the bank. You can do the maths, you're paying more interest over the longer term than you'd be paying SARS.

Not to mention you don't know what the future holds for your life, and you don't want to saddle your dependents with the headache of debt and life insurance claims. There's more peace of mind in leaving them with a paid off property which they can either sell or continue renting out or use...

 

[zerocool2009]

Lets start a "being a landlord" thread

As this is related to buying property !

 

[RonSwanson]

I personally don't see the point in delaying your profits to avoid paying SARS more. You're kind of spiting yourself, not just them. It's kind of like taking a lower paying job to avoid paying more tax. In a higher paying job, your tax is more, but so is your nett income.

Money in your pocket now, is money that you can use right now. Possibly towards buying and paying off another property sooner.

On a 10k rental, after agents fees, levies, rates etc. You're looking at tax on about 6k, which at 40%, you'll take home R3,600. Whereas on a bond of 1m and a repayment of 7k + life insurance, most of your repayment is going towards interest, and you're not taking home much.

The choice basically comes down to paying SARS or paying the bank. You can do the maths, you're paying more interest over the longer term than you'd be paying SARS.

Not to mention you don't know what the future holds for your life, and you don't want to saddle your dependents with the headache of debt and life insurance claims. There's more peace of mind in leaving them with a paid off property which they can either sell or continue renting out or use...

You clearly don't understand gearing.

 

[LostGoat]

On a 10k rental, after agents fees, levies, rates etc. You're looking at tax on about 6k, which at 40%, you'll take home R3,600. Whereas on a bond of 1m and a repayment of 7k + life insurance, most of your repayment is going towards interest, and you're not taking home much.

Sure but you also have 1 million to invest. So as long as you can earn after tax more then the interest you would pay the bank less the SARS refund you are better off. So for example if you had prime of 7% and a marginal tax rate of 40% you only need to find an investment that returns 4.2% to be better off.

Obviously there is more risk and gearing works both ways it increases profits and losses and you need to balance it with your risk profile. But with no gearing historically I would be suprised if property beat equities very often.

 

[I.am.Sam]

anyone know where that home improvements thread is ?

 

[APoc184]

anyone know where that home improvements thread is ?

https://mybroadband.co.za/forum/threads/the-home-improvements-thread-2.1030721/

 

[I.am.Sam]

https://mybroadband.co.za/forum/threads/the-home-improvements-thread-2.1030721/

perfect thanks

 

[Mike Hoxbig]

You clearly don't understand gearing.

I do, I just don't see the point of it. The prospect of gaining an asset that you don't pay for, while paying as little tax as possible is attractive, but I'd rather have money now than money in 20 years. The appreciation on the asset will be the same in either instance, but the former carries zero risk.

Companies have infinite time to do things like this, human beings don't. If you flatline tomorrow, you're leaving your loved ones with an admin headache if they aren't as savvy as you are. Which in the case of my wife, is definitely the case (just don't tell her I said that).

Also, if you have no rental income for 12 months because of whatever reasons, then what? Landlord's insurance will only take you so far before you have to start footing the bill yourself. And even then, you can't claim on non-occupancy, only non-payment. The interest you'd be earning on 1m will definitely not be enough to cover even half of it.

It's just too stressful for someone like me who prefers peace of mind.

Sure but you also have 1 million to invest. So as long as you can earn after tax more then the interest you would pay the bank less the SARS refund you are better off. So for example if you had prime of 7% and a marginal tax rate of 40% you only need to find an investment that returns 4.2% to be better off.

Obviously there is more risk and gearing works both ways it increases profits and losses and you need to balance it with your risk profile. But with no gearing historically I would be suprised if property beat equities very often.

Agreed, if you're risk tolerant and it doesn't bother you, by all means go for it. As someone who doesn't see the point in sitting on money that you can't use, I would digress.

The whole point of making money is to use it, and you're ultimately trying to make money that you can use while you're living, not to die with it in your bank account.

Anyway back to the topic at hand, we can probably take the rental discussion to a new thread...

 

[RonSwanson]

I do, I just don't see the point of it. The prospect of gaining an asset that you don't pay for, while paying as little tax as possible is attractive, but I'd rather have money now than money in 20 years. The appreciation on the asset will be the same in either instance, but the former carries zero risk.

Companies have infinite time to do things like this, human beings don't. If you flatline tomorrow, you're leaving your loved ones with an admin headache if they aren't as savvy as you are. Which in the case of my wife, is definitely the case (just don't tell her I said that).

Also, if you have no rental income for 12 months because of whatever reasons, then what? Landlord's insurance will only take you so far before you have to start footing the bill yourself. And even then, you can't claim on non-occupancy, only non-payment. The interest you'd be earning on 1m will definitely not be enough to cover even half of it.

It's just too stressful for someone like me who prefers peace of mind.

Agreed, if you're risk tolerant and it doesn't bother you, by all means go for it. As someone who doesn't see the point in sitting on money that you can't use, I would digress.

The whole point of making money is to use it, and you're ultimately trying to make money that you can use while you're living, not to die with it in your bank account.

Anyway back to the topic at hand, we can probably take the rental discussion to a new thread...

OK. To generate wealth, one does need to 1) make sacrifices and 2) take some risk. These are the basics of virtually any investment.
The only other alternative is to live hand to mouth, vote for the ANC and hope that when they expropriate something, you get a piece for free.

 

[Pho3nix]

I'm very interested in the Landlord thread so if that could be started I'd appreciate it

 

[I.am.Sam]

I'm very interested in the Landlord thread so if that could be started I'd appreciate it

Landlord Tips & Tricks

So following on from the Offer to Purchase thread, it seems like there is enough appetite in people becoming landlords. Everyone has their own take on acquiring additional properties (buy cash vs bond etc.), and ultimately it comes down to your personal circumstances. Post all your tips and...

mybroadband.co.za

 

[VBot]

Banks seems be pretty willing atm, absa just seems be handing out bonds

So Nedbank came within two days to approve in principle, but still to confirm interest rate while FNB also said that they are processing the application.

However, the other three banks haven't even acknowledged application. Is this normal? Should I follow up?

Btw, I was surprised by Nedbank as out of all the banks I have never had any affiliation with with them and sort of expected them to reject it.

 

[I.am.Sam]

i got back offers within 5 days from all 4 major banks using a bond originator

all very good rates but FNB (current bank) had the best rate

 

[TofuMofu]

Anyone live in a complex with piped gas?

I sold my unit and they say I need to supply a "GAS INSTALLATION CERTIFICATE OF CONFORMITY", so wondering if it needs to be done even though the gas is technically not on my premises other than the pipe line coming in to my stove.

 

[Tman543]

So Nedbank came within two days to approve in principle, but still to confirm interest rate while FNB also said that they are processing the application.

However, the other three banks haven't even acknowledged application. Is this normal? Should I follow up?

Btw, I was surprised by Nedbank as out of all the banks I have never had any affiliation with with them and sort of expected them to reject it.

These two threads below would give you an idea on the HL rates each banks offers and the time it takes. In my experience Nedbank was always the fastest in getting an offer to you.

Homeloan Interest Rates

I remember a few years back that no matter how good your credit rating, your interest rate was going to prime + because of the general economy. Have things changed and banks a little better ?

mybroadband.co.za

https://mybroadband.co.za/forum/threads/home-loan-prime-minus.1123898/

 

[N@t3]

Any day now will be registered. Its been kak long

 

[Tman543]

Anyone live in a complex with piped gas?

I sold my unit and they say I need to supply a "GAS INSTALLATION CERTIFICATE OF CONFORMITY", so wondering if it needs to be done even though the gas is technically not on my premises other than the pipe line coming in to my stove.

It should state in the OTP, but if the gas stove and tank is immovable I suppose the Body Corporate should supply the certificate (is the tank in the apartment ?)