Property investment in SA

**Isetech** · 25-Nov-23, 08:21 AM

What are your thoughts on property investment in SA?

I am in a situation where my property has a small bond, and not sure what to do, if the articles I read on a daily basis are anything to go by, paying off my bond is not the smartest thing to do right now. It might be better to increase my bond and remove the money and invest it somewhere else.

Elections coming up, who knows what is going to happen.

**Derlyn** · 25-Nov-23, 02:06 PM

My late dad used to drum a couple of things into me and I'm forever gratefull that he did.

1. If you have lots of money in the bank, you are stupid. Money in the bank doesn't work for you.

2. Never die with money in the bank. Always make sure you owe the bank money when you die. Now, nobody knows when they gonna die, so work with your money as if it's gonna be tomorrow.

3. Use as much of the banks money as they are prepared to lend you.

I'd say, do not pay up your bond. Rather max it and use the capital elsewhere. That's my opinion, but different okes, different strokes.

The other day my wife was telling me about an article she read that suggested that sometime in the future there might be an electronic catastrophy where banks will not know how much they owe you or how much you owe them. When that happens, I'll be ready with the champagne.

**Justloadit** · 25-Nov-23, 05:08 PM

My opinion, is not to max out the loaning for the sake of it.
If the money is working to increase your wealth, then go for it.
In most cases the loan is maxed out to soft expenses, that is spent on items which do not generate wealth.

Just remember that your house is your home, if you don't own it you do not have a home.
If we go through covid again, and there is no income, then repayment of the loans is the issue. You could land up having less than nothing if payments are missed.

My belief is invest with the cash you do not need to live with, then if it goes south, you can recover quickly.

**Blurock** · 27-Nov-23, 08:44 AM

Everyone's financial circumstances are different and therefore I am weary of financial advisors or advice from friends/family and clever people. Just read Steinheist about the corruption in Steinhoff, South Africa's biggest fraud (apart from state capture). Financial analysts where blind to all the red flags and were happy to be dined and wined by Marcus Jooste and his gang. So many "brokers" work for big institutions and only sell the products that bring in the most commission ( as ordered by their bosses). Financial advisors have admitted this to me, so take this as a fact.

The worst thing that you can do is to be a slave to debt. I have opted to accelerate my bond payments so that I could be debt free. This gave me the freedom to do other things with my money. When I decided to leave the corporate world and started consulting, there was no pressure on me to earn a salary from day one. I've eventually invested in a manufacturing business and have also made mistakes along the way, but it all worked out well in the end.

I have learnt that cash is king. It allows you to sleep at night (Jy SKRIK nie wakker nie). Being debt free allows you to bargain and to sit out difficult times so that you can bounce back when opportunities arise. You can also use your assets as collateral if need be. Yes, money in the bank does not work for you, but have cash available for when an opportunity arise. Do NOT use it to buy that Ford Mustang or overseas trip that does not generate an income or add value. I have also learnt that honesty is the best policy and do not fall for any "get rich quick" schemes.

Cash flow is important. In my business I pay cash and do not allow credit. If you cannot afford my product or services go try elsewhere. People import goods and pay up front to get (sometimes sub-standard) products delivered months later (or not at all). So why not pay cash for a quality South African product and excellent service?

Please do not see this as advice that will work for everyone. This is just my side of the coin.

**Isetech** · 28-Nov-23, 10:42 AM

Got burnt once (lost millions), not a big fan of listening to people who work in the only industry that has millionaire clubs.

Chatting to a mate 2 weeks ago, he just lost his entire life savings, now has to start all over again.

Many people my age are being paid out what sounded like a huge sum of many 30-40 years ago, from policies they have paid in more than they received in the payout.

Originally Posted by zaki_smm

Navigating financial decisions can indeed be challenging, especially considering the dynamic economic landscape and the uncertainties surrounding upcoming events like elections.

It's essential to weigh your options carefully. While paying off your bond provides a sense of security, leveraging your property's equity by increasing the bond and investing elsewhere is a strategy some consider for potential returns. It's advisable to consult with a financial advisor who can assess your individual situation, align your goals, and offer personalized advice based on your unique circumstances.

Their insights can provide clarity and guide you in making informed decisions amid the prevailing economic uncertainties.

**Blurock** · 30-Nov-23, 10:58 AM

One has to distinguish between a broker and a financial adviser.
So many firms and banks call them brokers, bit if he is an employee, he can only sell what the institution promote and allows him to sell.
A broker is an independent, registered professional who can invest anywhere. There are also good and less successful brokers.
Choosing the right one is a minefield.

I have been bitten before, so that is the reason why I would rather invest in my own business than in an institution that may not be there tomorrow.
An investment may give you a nett return of say 10% per annum, but in your business you can earn that 10% (or more) every month!

**Derlyn** · 30-Nov-23, 11:38 AM

@Blurock, I love the way you think. 👍👍👍

**Isetech** · 02-Dec-23, 05:50 AM

I think I can speak for many tradesmen who were hood winkled into rushing out and buying policies from those scavengers who arrived at the appy schools. It was like taking candy from kids, who had been brain washed by their parents into thinking, go to school, get a job with big company, buy policies from all the big name companies (we all know who they are) and be exploited for the rest of your life, then retire to find that all the money you invested isn''t even enough to buy a retirement home

and the pension payout cant even cover the levy in the retirement village.

The worse part, I am told that what the scavenger did is now regarded as illegal

Too late she cried. I could have invested the pathetic payout (around R3M) into my business and expanded it as I am now ready to do, instead it looks like I am going to have to take a loan. Lessons learnt too late, but I am not going to let it hold me back, instead I am going to go into 2024 with positive mindset.

I am in the same position as I was in Jan 2020, I have recovered from covid, the unrest, floods and all the other other crap we have experience in the past 3 years.

People ask how I just keep getting back up and trying again, no matter how difficult the challenges, boy have I had some challenges in my life.

My focus has changed slightly, instead of it being about me ( I dont need to prove anything to anyone, been there done it) , I am going to start sharing all my knowledge with the new guy (a youngster who I recently employed) and teaching him everything I know, so that he can grow and hopefully one day take over or start his own business.

Originally Posted by Blurock

One has to distinguish between a broker and a financial adviser.
So many firms and banks call them brokers, bit if he is an employee, he can only sell what the institution promote and allows him to sell.
A broker is an independent, registered professional who can invest anywhere. There are also good and less successful brokers.
Choosing the right one is a minefield.

I have been bitten before, so that is the reason why I would rather invest in my own business than in an institution that may not be there tomorrow.
An investment may give you a nett return of say 10% per annum, but in your business you can earn that 10% (or more) every month!

**Beancounter** · 06-Dec-23, 02:41 PM

I paid off my bond and saved a ton in interest, but never had the bond cancelled. The title deed may not be in my possession, but now I have credit at a rate below prime for a number of years to come

Withdrawing the funds and reinstating the bond debt will incur interest at a higher rate than the rate I can earn on investing the money with the bank, so that is not an option.

Your situation may differ, but for myself an option is to withdraw the funds, add it to some savings / other monetary investments I have and buy another property to rent out. My return on the rental property investment will exceed interest on the bond and earnings on available funds that I will be forfeiting if I use the investment for the property purchase. I can use excess funds from the rental to pay off the bond sooner and save on interest.

When considering the tax implications, I may break even and not earn more than my current situation. However, I'm counting on capital appreciation of the property with the option to sell in the future at a greater profit than the gains I would've made on my current monetary investments and liquid funds. If the rental income is sufficient, I can consider just retaining the rental property and earning rental income. Try to diversify though, because one rental property is not a guaranteed monthly income if there's a possibility of the place being vacant for whatever reason.

Bottom line is, if you can earn more by using the bank's money, then do that before being debt free but earning a pittance on your investments with banks.

**Blurock** · 08-Dec-23, 09:46 AM

The Beancounter is right. You can make debt if that is an investment that can generate a return.
Just be careful and do proper homework.
Sometimes one is forced to borrow money to buy a vehicle or property or even stock or raw materials for your business.
There are several sources of funding, but the best is the 30 days allowed by suppliers. Interest free and flexible to an extent.
That is why you treat your supplier like a king and you pay him ASAP so that you may also get a settlement rebate.

If you make debt to buy that Mustang or power boat or BrokeMaarWindgat you are in trouble.
Ego or emotional purchases for something that you don't need, just to impress the Joneses, will make you a slave to debt.