and investments. This provides you with a complete overview of your financial situation on a daily basis.
Mobile2Budget is another mobile application, available for download, that allows you to set up a predefined budget for capturing daily expenses. Like 22Seven, the app allows you to set budget categories and goals for monthly expenses. It then alerts you when you’ ve overspent. This allows you to track your spending decisions so you know when to start pulling back and slowing down to stretch your budget to cover the month. In addition to the monthly email updates, a Mobile2Budget Personal Trainer is appointed to each user, to help them, amongst others, identify and address their most expensive debt, and plan together to reduce their overall debt and increase their affordability rating.
5Save for a deposit
Buyers and investors who can afford to put a deposit down on a property will have more negotiating power with lenders, as well as more access to financing options. An upfront deposit will guarantee you a better interest rate, which will save you considerable amounts over the term of your bond. If you apply for a 100 % bond, you will receive a higher ‒ risk adjusted rate. The bottom line is that banks consider applicants to be lower risk if they can demonstrate an ability to save.
An upfront deposit on a property also gives estate agents and sellers confidence in your ability to get a bond approved, as you won’ t have to wait to raise an 100 % bond.
Prequalification with a bond originator will let you know what price property you can afford and how much of a deposit you will need for a property in your price range.
DOING THE MATH:
FLISP subsidy: R20 000.00 Bond: R500 000.00 Cost savings on bond repayments: +/-R100 000.00 Time Savings: from 20 years in bond repayments down to almost 18 years
FLISP subsidy: 40 000.00 Bond: R400 000.00 Cost savings on bond repayments: +/- R170 000.00 Time Savings: from 20 years in bond repayments down to almost 15 and a half years
FIRST TIME INVESTORS- THE DIFFERENCE
While the process for a first-time home buyer and first time investor follow similar paths, the difference comes in four main areas that drive the real estate investor:
• Ability to source the best property returns
• Ability to become the best buyer
• Ability to get the best finance
• Ability to manage the property efficiently
Achieving the best property returns – look at the numbers We advocate investors buying rental properties in markets that have attractive rent-to-value ratios, where the primary goal is positive cash flow and not capital gain, which is more speculative and risky. Investors invest for cash flow, equity, appreciation, adaptability of property or for tax benefits.
Becoming the best buyer – find properties with problems Become the best buyer by buying a problem that the current owners don’ t want to fix. Your ability to buy a property like this, with cash, and the ability to finance a property quickly can set you apart from the pack. Make sure you have great credit and access to finance or an investor who can co-invest.
Get the best finance deal – get good partners Investors avoid unnecessary expenses by putting down the least deposit possible, with the best interest rates, and by using longterm financing with banks or lenders to maximize leverage of their purchasing power.
Another great way an investor can save is to avoid paying transfer duties from existing properties, which can eat into your budget. The transfer duty threshold in South Africa has just been adjusted from R750 000 to R900 000, which is good news for first time buyers and investors wanting to get a foot onto the property ladder.
Manage the property effectively – maximizing the lease The fundamental difference between a first time homebuyer and an investor is that the investors buy to rent out the property while the homebuyer lives in the property. For the investor, this means having the ability to manage the property effectively and generating enough cash flow to cover all expenses. Here, the tenant essentially pays down the debt of the property not you and is detailed in the lease.
RESOURCES
Credit Bureau, My Bond Fitness, Finweek, Ooba, Absa Home Loans, FLISP. co. za,
Consumer Housing Education, Debt Busters.
www. reimag. co. za MARCH 2017 SA Real Estate Investor 23