- How much do you estimate your current net worth is across your entire portfolio?
- What type of property do you invest in?
Residential Properties –
2 X 3Bedroom, 2 bathroom Townhouses in Mondeor, JHB
1 X 3 Bedroom, 2 bathrooms Cluster in Liefde en Vrede, JHB
1 X 3Bedroom, 2 bathroom Freestanding Facebrick house in Liefde en Vrede, JHB
1 X 2 Bedroom, 1 bathroom Freestanding House, with a Granny Cottage suitable for 2 people and Bachelor Pad suitable for one person on the same property in Eldorado Park, JHB.
1 X 2 Bedroom, 2.5 bathrooms Freestanding Facebrick house in Centurion, Pretoria
- What is your reasoning for your property selection criteria? (Why, when, where and how?)
Why: I prefer residential because I now know what it entails and I realize there will always be a market for residential properties. People will always need a place to stay, they might not necessarily need a business premises.
When: I find property to be an excellent investment because money can be made while owning the property through Rental income and a profit can be made when selling the property. The value of property can also significantly increase in short period of time, which means that you can receive an excellent return on your investment.
Where: The majority of my properties are in Johannesburg, the economic hub of SA. There is a huge demand for Rental properties because of the influx of people from other provinces. Also most people cannot afford to buy property due to various reasons so renting is the next best alternative.
How: I bought my first property as my primary dwelling, I bought my second property for my mom because their house was repossessed. I paid off both properties within a 7 to 8 year period. For both properties I gave a deposit and I increased my Bond repayment with my salary increases on a yearly basis.
- What has your overall strategy been since your started investing?
When I purchase a property I always put down a deposit, I pay all transfer duties and attorney fees out of my own pocket and I increase the bond repayments. FNB offered me revolving credit on the Bonds that I have with them so I pay up the bonds and use the same money to buy other properties. That way I don’t have to re-apply for finance or renegotiate a better interest rate. I also make sure I negotiate an Interest rate below the Prime rate. By using these strategies I’ve manage to buy 4 additional properties whilst still retaining only 2 Bond with excellent interest rates. Since a traditional bond is over a period of 20 years, why not use this time and availability of credit to buy several properties?
When did you start investing in property?
I bought my first property in 1998, this was my primary residence. After I bought a property for my mom, I extended the property and added 2 additional outbuildings for rental purposes that will provide a revenue stream (Rental income) for my mom and my brother in case something happened to me. I wanted to make sure that my mom was taken cared off since she was divorced and unemployed and my brother was 13 years old and a dependant.
- What was the first property you ever invested in?
The first “Investment property” was a 3 Bedroom, 2 bathroom Facebrick freestanding house I bought after I got married in 2007. The thinking behind the purchase wasn’t so much for investment purposes but more as a place to move back to in case my marriage wasn’t successful. The purchase of this property was to provide security more than anything. I don’t believe in moving backwards so moving back to my Townhouse which I resided in for 8 years wasn’t an option. At this stage I was renting out my Townhouse since the Bond was already paid up.
- What has been your most significant property investment to date?
I consider all my property investments as significant. The properties are in prime locations, spacious and well maintained. What did blow my mind and which was a first for me was when ABSA offered me a Bond for over a Million rand and offered an Interest rate below the Prime rate without me asking for a reduced rate. All the other properties up and until this point has been below a million rand, so being able to purchase a property above a million rand I definitely consider significant.
- How much of the capital used to start investing was your own?
My 1st property was R158, 000, The bond amount that I received was R106, 000, I invested R 52,000 of my own money
My 2nd property was R 92,000 I invested R 12,000 of my own money, and invested a further R 75 000 in extending the property and adding the rental properties.
My 3rd property was R 850, 000 I invested R 250,000 of my own money.
My 4th property was R 660, 000 I invested R 300, 000 of my own money.
My 5th property was R 665, 000 used revolving credit as bought the property in full.
My 6th property was R 1250, 000 I invested 10% of the Bond Amount and I paid the transfer duties, attorney fees ect, from my own monies.
- Outline your asset management and risk management/strategies for these categories:
I ensure good credit ratings and credibility by making bond payments on time and ensuring that there is sufficient capital in my account for debit orders to be deducted. I manage and advertise my own properties. I select my own tenants and they sign a Lease Agreement. I do the necessary checks at no cost to the potential tenant. I find treating people fairly and honestly goes a long way in this industry. I use a relational style management approach, where tenants can directly contact me regarding the property. I usually inform potential tenants that besides the terms and conditions of the Lease Agreement the most important things I expect from them are;
- To look after my property because it’s my asset and
- To pay the Rental on or before the due date
I protect my assets through taking out the necessary insurance cover where applicable, ensuring compliance to Body Corporate Rules and Regulations, an Valid Lease Agreement that is renewable and regular visits. Initial tenants will only sign a 6 month Lease Agreement instead of a 12 month. This Lease Agreement will be renewable without a Rental increase. This is to assess the Owner/ Tenant relationship.
All the properties I’ve invested in are producing a positive cash flow except for the most recent property purchase. Properties in desirable areas will inevitably be more expensive and trying to cover the entire bond can be a huge challenge. Buying property or any other capital purchase is a long term investment depending on what your objectives are. Mine is to build a portfolio of properties for rental purposes which will provide me with financial stability. So even though the rental at my last property purchase doesn’t cover the entire bond repayments, it at least covers about 80% of the bond amount. Since it is in a desirable neighbourhood I have no doubt that I will get a return on my investment if I decide to sell at any time.
Interest rates are always negotiable and a good credit report can assist with getting a good rate. Interest rates are also tax deductible against rental income. So even though I will always make appoint of negotiating a better interest rate when I’m buying property, I also know that it is something I can claim back from SARS.
- How would you say you conducted yourself ethically in your investment practices?
I find that transparency is a key component when it comes to ethical behaviour. When I send a Rental breakdown to my tenants on a monthly basis I submit supporting documents such as a Levy statement or Municipality account so that they can see where the amounts ( Financial figures) derives from that is included in their rental payment. A clear and simply written and understandable Lease Agreement as well as a positive approach produces trust and confidence. I invite my tenants to seek clarity on any information on the account and the property. Payments such as levies as well as Rates and taxes are tax deductible and are therefore for my account. None of my tenants are charged for those.
- Do you contribute to your family or community? How?
I am currently supporting my mother who is a pensioner, my brother and my niece who is residing in my property. I also make financial contributions on a monthly basis to cover basic expenses. The 2 Outbuildings, a One bedroom cottage and a Bachelor Pad also provides rental income. I deliberately keep the rental low and affordable because of the disadvantage community it is situated in. All the properties are secure, have its own entrances and include Electricity and water in the Rental price.
My rental income also helps me to support missionaries, 24 children from disadvantage communities through my church involvement and activities, and it provides me with the financial flexibility to assist when the need arise. I also encourage young people to invest in property; I give them free advice on how to start. Even provide them with a standard Lease Agreement, and provide them with information on what can be claimed back from SARS. A university friend of mine bought her first property and the Rental agent informed her that the rental she can expect will be between R 7400, 00 to R 8000, 00 per month. I offered to assist her, I visited the property, took my own pictures, wrote the brief for the rental and two days later she had an interested tenant that was willing to pay up to R 9500, 00 per month in rental. I also provided her with a Lease Agreement and gave her some tips on how to manage the property and the tenant.
- If you could do it all over again, what would you change and why?
What I would change is probably to start investing in property at a much earlier age. I was 28 when I bought my first property and 38 when I actively starting investing in property. I wish I knew then what I know now i.t.o investment, tax rebates and deductible etc, I would’ve saved a ton of money. Luckily knowledge comes with experience at least that is what happened to me. I would also start managing my properties myself instead of using dishonest Rental agencies, independent rental agents and attorneys. I’ve learned that sometimes you just have to cut your losses and move on. Being honest and transparent with people and maintain a relationship with them is cheaper than threatening them with attorneys.
- How has investing in property changed/altered your life?
Investing in property has completely altered my life. My rental income has exceeded my salary income by 200%. It is providing financial security and stability not only to me but also to my family and my community. Trying to create more than one income stream can be a challenge, investing in property has provided that income stream to me. Even though the initial investment is huge for any capital purchase the return of investment can be significant when managed correctly. Of the six properties I have, I own 3 ( have the Title deeds in my possession) and the other three are bonded, mainly for tax purposes. I’m blessed to have awesome tenants who pay their rent on time and in full every month. One of my tenants rented from me for 5 years. She eventually bought her own property which I was very excited about. We still remain friends to this day. She taught me that giving a person a chance in spite of their previous mistakes can also be a good investment.