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Thread: investment question!

  1. #11
    Site Caretaker Dave A's Avatar
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    I think when it comes to your primary residence, you've got to factor in the fact that you need to stay somewhere - so the equivalent rental needs to be factored into the equation.

    For investment properties, someone else is paying the rent - and the money is made by capital growth as well as rental escalations. This, of course, assumes capital growth and an inflationary environment.

    As an aside - I suspect this is why good equities outperform property over the long term. With a property - well, it's earnings footprint growth is rather limited to the size of the plot. With a good company, they are constantly striving to grow their earnings footprint.

    As Karen pointed out earlier, though - External financing is something of a swing factor in what might be best for any particular individual at any given time.

    I also share Karen's concern that financial planners might be more motivated by what yields the best commission as opposed to the best return for the investor.

  2. #12
    Email problem Karenwhe's Avatar
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    Chatmaster, I don't understand what you don't understand .

    You actually do not buy property. You buy money it is called a bond and you sell it at a higher rate than you buy it. You do this by buying with that money a property that is cash positive.

    You sell this money (figuratively speaking) to the person/tenant that can not or does not want to have a bond right now.

    Does that make more sense.

    P.S. If you buy property in the entry level townhouses where there is a shortfall between the bond repayments and the income, then of course you can't do what I just said because eventually bankruptcy may lurk around. Though even that is not 100% true, but only a possibility if finances are miss managed in a restructure should things get tight.

  3. #13
    Email problem Karenwhe's Avatar
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    Quote Originally Posted by Dave A View Post
    I think when it comes to your primary residence, you've got to factor in the fact that you need to stay somewhere - so the equivalent rental needs to be factored into the equation.
    Primary residence is usually a liability up to the time when equity becomes realized. I know a million people would want to argue with me because it hurts their perceptions, but that is besides the point...... simply because primary residence does not make money and equity is "ghost money" until it is realized and you can :take it to the bank", as they say.

    And if you don't believe me ask all the people that didn't have sound financial management and now are being repossessed. What does their asset equity help them? It is the exact liability that got them repossesses because......... they couldn't afford it anymore.

    Quote Originally Posted by Dave A View Post
    For investment properties, someone else is paying the rent - and the money is made by capital growth as well as rental escalations. This, of course, assumes capital growth and an inflationary environment.
    That is true. Money is made both in capital and income. But if one aims to be financially free one day soon, they should aim to buy properties that are suited for income and leave the capital issues as a side benefits.

    The best situation is to find the middle ground between income and capital. But that will depend on what ones strategy and what one needs (e.g. at an advanced age person may not be able to think much about capital but more about income to live on because of obvious reasons).

    Quote Originally Posted by Dave A View Post
    As an aside - I suspect this is why good equities outperform property over the long term. With a property - well, it's earnings footprint growth is rather limited to the size of the plot. With a good company, they are constantly striving to grow their earnings footprint.
    I do not remember last when, equities have made someone financially free within 3 to 5 years and rich beyond any basic needs quite fast thereafter.

    That set aside, I believe in equities, but less than in properties, simply because you have no control. It is as simple as that.

    Good companies go down, properties don't and if they burn, get wiped out you have insurance. And if equity goes down, rent still comes in. Think about that for a second.

    What do you get when the stock market goes down (a lot of money if you are short, but besides that) if you are invested in a company and the sectors is getting wiped out for some reason and the good company can't make it. What do you get? And then how much control do you have to save your situation?

    That is not to say that one can't lose a property, but that would be the investors fault in financial management and it can happen, but the investor still has control. In good companies you have to take a microsoft perspective: "plug and pray" . Just kidding.

    If I want equities I would rather go IPO than invest in someone else. But hey that is me. I play the stock market, but not for investment at any rate, but pure making money day and intra day trading (and I must make a shameless admition....... also for fun).

    Hope this helps.

  4. #14
    Site Caretaker Dave A's Avatar
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    Quote Originally Posted by Karenwhe View Post
    I do not remember last when, equities have made someone financially free within 3 to 5 years and rich beyond any basic needs quite fast thereafter.
    You reckon it's not happening? I reckon folks just don't shout it from the rooftops as much anymore.

    I've got to say, there's a lot to think about in this thread.

  5. #15
    Email problem Karenwhe's Avatar
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    Quote Originally Posted by Dave A View Post
    You reckon it's not happening? I reckon folks just don't shout it from the rooftops as much anymore.
    I just don't see that, that is why I am saying it. I don't really understand why, but many people have become financially free through property, again, you may think I am not objective, but I live in both worlds, just happen to focus on one right now more than the other.

    When were they bragging? I missed that point in time. Maybe it is me, no worries. But other than the tech boom, (in which time I was right in the middle of it and working with telcos - not in SA), IPOs plenty, money was growing on the trees, no kidding it wasn't even funny anymore.... I did not see this happening.

    But again, I am not saying it is not possible, or it didn't happen, but what I see is that it does not happen as often as property and you have NO control.

    In equities and companies if you want to have control, build a company with an IPO exist strategy - but that is no kiddies game and we all know that.

    Which..... with the risk of sounding like a control freak, which I am, I don't live in denial about anything - control of ones assets and knowledge has massive importance for fast and easy success.

    Forget strategy and anything else, if you have no control, all bets are off. Just think about it for a second.

    I don't want so sound anti in any way, as I said I live in both worlds, but for the man in the street with a job and basic needs such as putting food on the table, playing in a world of the "good companies" can be vastly misleading to where it can end up. And we all know Enron and even Apple was up for explanations with back dated shares, sub-prime problem was also created by some "good old companies" with some dumb ideas, and the list is so long that is not worth mentioning anymore.

    Opportunities are plenty in both markets, "short", "long", "bull, "bear" you name it... but you need control to a decent extent and lots of knowledge to make the right decisions in both markets.

    Property is just far more easier and even more forgiving to some extent.

  6. #16
    Email problem Karenwhe's Avatar
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    Quote Originally Posted by Karenwhe View Post

    Which..... with the risk of sounding like a control freak, which I am, I don't live in denial about anything - control of ones assets and knowledge has massive importance for fast and easy success.

    I don't want so sound anti in any way, as I said I live in both worlds, but for the man in the street with a job and basic needs such as putting food on the table, playing in a world of the "good companies" can be vastly misleading to where it can end up. And we all know Enron and even Apple was up for explanations with back dated shares, sub-prime problem was also created by some "good old companies" with some dumb ideas, and the list is so long that is not worth mentioning anymore.
    Did anyone expect this? I sincerely prefer to have the knowledge and control of my own assets and wealth creation.

    A scheme that promised easy, risk-free money is turning into a nightmare for clients. The company has been in existence since 1992.
    http://www.sapropertyinvestor.co.za/...7652&sn=Detail

  7. #17
    Site Caretaker Dave A's Avatar
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    That link doesn't seem to go to open content, Karen.

  8. #18
    Email problem Karenwhe's Avatar
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    I really don't know why it doesn't open (tried it again and opens on my pc).

    So to fix that problem, here is the link again and text below in case there is something wrong with the link.

    http://www.realestateweb.co.za/reale...7652&sn=Detail


    Home loan scheme falters
    Julius Cobbett
    04 March 2008

    The next Money Skills? A scheme that promised easy, risk-free money is turning into a nightmare for clients.

    Clients of a company called Asset Management Services (AMS) find themselves in a pickle. The company is defaulting on debt that is held in their name, which could lead to blacklisting. Their fate is ironic, because AMS used to market itself as a cure for blacklisted South Africans.

    AMS featured last year on Moneyweb and sister website, Realestateweb, when we profiled one of its complex schemes. The scheme was pitched at creditworthy people, who were offered financial reward for helping troubled homeowners consolidate their debt.

    Another scheme promoted by AMS involved funding property development. The clients would take a loan to purchase stands, which would be developed and later sold, hopefully at a profit. For funding the development, clients would earn an upfront fee of 5% of the value of the loan.

    In both schemes, clients depend on AMS to service loan repayments on bonds registered in their names.

    Moneyweb urged its readers to exercise caution when dealing with AMS. We noted that despite AMS being in existence since 1992 and its registration with the National Credit Regulator, it was not well recognised in financial circles. Nor was there much public information available about its sole director Arno Coetzee.

    "Of course that alone is not reason to avoid AMS," we wrote. "But for a scheme as complex as the one it offers, having the backing of a large insurance company or bank would provide much greater peace of mind for potential clients."

    Unfortunately for AMS clients, our cautious tone proved to be well founded. In October last year, some AMS clients were contacted by banks, who informed them that their bond repayments had not been met.

    At the time, AMS claimed: "The reason for this situation is that we cancelled a number of debit orders of "inactive accounts" etc, but, by mistake, our bank then cancelled almost all debit order payments from our account."

    AMS enclosed a copy of a letter from its bank, FNB, which confirmed this excuse.

    However, this was not the end of the problems at AMS. Later in the year AMS again missed instalments on its clients' bond repayments.

    In a letter to clients dated November 5 last year, AMS blamed the latest default on "difficulties with the management of continuous deductions of ‘non-performing' clients versus those of paying clients."

    It said it had decided to stop all debit order deductions and manage the payments electronically.

    AMS said it anticipated a much smoother management of payments in the future. This did not happen. Instead, the company continued to default on its payments.

    Clients say that AMS director Arno Coetzee does not return calls or respond to e-mails. Moneyweb's own attempts to contact Coetzee have been unsuccessful.
    In the absence of any reassurance from AMS, clients have reason to expect the worst. They may be forced to sell the underlying property (possibly at a loss) or pay bond repayments they can ill afford. Failure to meet these repayments could result in blacklisting with the various credit bureaus.

  9. #19
    Site Caretaker Dave A's Avatar
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    Wierd, both links work now.

    Thanks Karen. Funnily enough Duncan raised this AMS risk free property scheme here last year.

    You'd think with the security that AMS is supposed to have kept in trust, there'd be adequate reserves to meet the bond instalments even if the debtor is defaulting. I wonder where those security funds are?

  10. #20
    Email problem Karenwhe's Avatar
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    My opinion is: something has badly gone wrong because the national credit regulator is asking people who are having problems to call them because they are now under investigation.

    If anyone here is under that situation, they can contact the person dealing with this at the national regulator, his name is Mark I have his email address tel. no.

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