C an you relate to Bob ’ s statement in your property investment journey ? Sometimes it seems as if all the banks want to do is hold onto their money , but that is not entirely true . Banks are in the business of lending . They make their money by lending money to people and entities that will pay them back with interest .
“ Business owners and freelancers often think that it is impossible for them to get financing from the bank because they are self-employed . The reality , however , is that banks want to help all industries and types of people ,” says Marléze Moller of My Home Loans .
Below are five tips on how you can improve your chances of getting financing as a self-employed person or freelancer .
1Structure your business , property portfolio and income
Banks like structure and the more structured your business and income are , the better your chances will be to get financing . That is why I recommend that you run your business through a company with its own bank account and annual financial statements . Even if you run your business as a sole proprietorship , still run it through a separate bank account and set up annual financial statements .
It is also not a bad idea to pay yourself a fixed salary from your business on a payslip with PAYE and UIF deducted . It just brings more structure to your income from a bank ’ s point of view . Keep in mind that if you are making a profit , you are going to pay tax whether you keep the money in the business or pay it out to yourself . And because your income tax is calculated on a tax scale , you will pay less tax in your name than a company up to a certain value .
It is also wise to purchase your properties in an entity such as a trust or company ( with the shares held in a trust ) and run it like a business with its own bank account and annual financial statement , especially if you want to buy multiple properties and plan to build a property portfolio .
2Update your admin
Banks need certainty that the person they lend money to will repay them timeously and therefore , the banks need to see a track record . This means the banks require certain information from you .
Banks usually request annual financial statements for the last two or three years , and the management accounts for the current year for your business . Financial statements play a big part in the credit decision as they have to prove income / drawings . If the business is paying for your expenses , this needs to show in your financial statements .
Suppose you already own property in the entity acquiring a property . In that case , banks will request the latest annual financial statements of the entity that holds the property , management accounts , updated lease agreements , etc . Be prepared and have all this documentation in place .
An IT34 , which is your income tax assessment , can also help with the credit decision . For commission earners , the banks usually look at the IT34 or IRP5 and six months ’ payslips to determine the average income . An IT34 might not always be a true reflection of personal income , because as business owners and freelancers know , you can always draw more from the business if need be .
“ It is very important that you speak to your accountant . Ask your accountant where they have declared the income . Go through your financial statements with your accountant . Don ’ t just assume everything is in order . Don ’ t be so obsessed with not showing a profit and not paying tax , that you can ’ t get financing for a property ,” Moller adds .
3Improve your credit score
When using Other People ’ s Money ( OPM ), you need a good credit record . Although it is noble to have no personal debt , it is a disadvantage when you want to use the bank ’ s money to build your property portfolio as you need credit to get credit . Start with a small limit on a credit card , an overdraft , and a clothing account or two . Always pay your bills on time ! And remember to check your credit score annually . The better your score , the better the financing you ’ ll get .
4Use a bond originator
Banks compensate bond originators , so it won ’ t cost you anything for them to apply at all the banks for financing and assist with the negotiation of your loan term and interest rate . My bond originator can almost always get a better deal from the bank than what I can .
Bond originators work with financing applications every day from morning to night . They know how to submit an application and the best way to present your information to the bank . Don ’ t be afraid to negotiate and send the proposal back if you are unhappy with it . I often get better interest rates and terms simply by asking !
5Apply at multiple institutions
I often get better deals from banks other than my own . Remember , each bank ’ s strategy and risk appetite are different at different times . Don ’ t assume that your bank is most likely to give you a home loan or the best terms . You would be surprised what great offers other banks can make you as all the banks are competing for your business when you are buying a property .
With these great tips , you have no excuse not to build your property empire with OPM ! So , go forth and get financed .
SOURCE Prosperity Enterprises
SA Real Estate Investor Magazine OCTOBER / NOVEMBER 2020 21
Books & Apps
HOW TO ATTRACT
To obtain this wealth, along
with the positive actions
of your conscious mind,
you have to train your
subconscious as well. You are
here to grow, expand, and
and materially. Consider this
your training manual.
7 WAYS TO MAKE
MONEY IN REAL
Are you interested in raising
your income without much
effort? Investing in real estate
is by far one of the most
profitable and evergreen
ways of making money
without putting in much
effort into it.
ONE HOUSE AT A
Building Wealth One House
at a Time reveals how virtually
anyone can accumulate one
million dollars worth of houses
debt-free and earn a steady
cash flow for life. Unique in that
it focuses on buying houses in
Multi-Family Millions offers
expert advice for investors who
want to make the transition
from single-family homes to
more profitable multi-family
units. Author, David Lindahl
shows you how to find troubled
properties that are ripe for
Udemy for Business features top-rated
content for you to learn new skills anytime,
anywhere. From software development, IT,
design, leadership to communication skills,
the Udemy for Business mobile app puts the freshest, most
in-demand content in your hands.
GoIndustry DoveBid, one of Liquidity Services
(NASDAQ: LQDT) online marketplaces, is now part
of AllSurplus.com. Why
Sellers have more sale options, such as Online
Auction, Make-An-Offer sale or an instant Buy-It-
Now sale. 14 000 sellers
Buyers are notifi ed immediately when assets they
are wanting to buy are uploaded for sale. 3,6 mill buyers
11 000 lots
ONE DECADE OF PROPERTY EXPERIENCE
auctions and sales
Client highlight: One of our
valued clients, Telkom SA, has
trusted us to sell their varied
property portfolio for the past
8 years. With over 22 auctions
of 200 properties, these sales
and auctions have grabbed the
interest of over 750 registered
bidders from across the globe.
EXCLUSIVE INDUSTRIAL OPPORTUNITY
SOLD R141 MILLION
SELL YOUR PROPERTY
This app connects users to their cities and/
or areas without one having to add users or
follow users to see activity in timeline. It also
allows users to explore other cities/areas in
their respective countries.
REVOLUTIONISING ONLINE PROPERTY AUCTIONS
2015 FAST GROWTH WINNER
This application allows users to record their
business transactions in the form of easy and
basic double entry “debit credit: accounting.
Once recorded, users can generate and
export all the transactions in CSV “Excel” format to perform
From best selling fiction, sci-fi and crime to
celebrity biographies, kids’ books and self
help, Audible helps you build a library you’ll
be listening to for years. Read by some of the
world’s best loved voices, every story is yours to keep, even
if you cancel.
Under the strong
leadership from Kim
DoveBid SA was
awarded the NBA
Fast Growth Award
in 2015. Awarded
for explosive growth
within the property
Kim Faclier, Managing Director at GoIndustry
DoveBid Property is an award-winning property
professional who has played a key role in
altering the landscape of property sales in
South Africa over many decades & continues
to expose all of our property sales to a highly
targeted audience consisting of local and
international bidders, thereby ensuring our
clients receive optimum value for their assets.
+27 (0)82 554 6295
0860 00 00 10
OCTOBER/NOVEMBER 2020 SA Real Estate Investor Magazine