Posts Tagged ‘Property’

You can’t SHOULD!

Monday, October 20th, 2008

They say there are 3 kinds of people in the world – those that can count and those who can’t!  I think there are two kinds of people in the world – those who do and those that don’t!

 

The kind who “don’t” always find an excuse why something will not work, or why it is a scam.  Or they always have a better alternative.  That is the kind who sees an advert for a free property seminar in the paper (we offer free seminars), and without investigating decides that it is a scam, an advertising ploy, does not work, or it is useless because it is free.

 

This group is the group that attends a seminar, but when they take their seats they openly say:  “I am only here to proof that it does not work”.  At one seminar a guy sat down and said:  “I do not believe that you can have more than one bond.”  That was his litany for the evening!  And his parting words!  And I said to myself:  “Sir, fortunately, what YOU belief only affects YOU and YOUR loved ones.”  What you believe only affects YOUR wealth, not mine!

 

This is the group who always say:  “I should have …” and they use “If” a lot, as in “if I knew what property prices would do, I would have …” and “If I can now buy this wonderful property …”  The problem is, they  don’t know where this wonderful property is.  And the biggest problem?  Nobody can “should”.

 

Needless to say, they never do and invariably when they do get the guts to act, they rush in where angels fear to tread!  If we apply this to worldwide retirement statistics, that is about 94% of the population!

 

The other kind of people DO!  They don’t talk about it other than to gather information, knowledge and wisdom.  They get the info they need and go out and do it.  Rarely do they discuss with other people what they did.  Rarely would you see from the outside what they do.  I call them Nike people – they Just do It! 

 

Let me illustrate the difference with a story:  I tell you that you will find a R20 000 000 at a specific office in at an address 1500 km from you.  But you have to be there at EXACTLY 12 hours from now.

 

The don’ts will say things like “it is not enough time to get there”.  Or “I don’t have the money to get there”.  Or “what if I get there and I am late?”  “What if he is lying?”  “What if I get there and it is only R19 999 999?”  They will find an excuse not to go.  And that excuse will always take all blame and responsibility away from them.

 

The DOERS will quickly evaluate:  can I trust this guy?  If I do what he says, and he lies, what have I lost?  If I don’t do it, and it is true, what have I lost?  And he would be on his way.  Unfortunately that is apparently only about 6% of the population.

 

The other 94% either thinks of ways to get at the money of the DOERS or enviously dreams about having that much money.  After all, it is easier to try and win R20 000 000 on the Lotto!

What Should I Buy?

Tuesday, October 14th, 2008

As I have said yesterday, I get the question:  “what should I buy” quite a lot.  We looked at the benefits of 2nd hand properties.  Today we consider the risk of new developments.

 

The biggest benefit is that new developments come with costs included.  Therefore a new development is the ideal opportunity to buy a property in a trust!  That is a huge benefit and opportunity.

 

But you do have different risks with new developments.

 

The first risk is that the unit will be vacant for a month or two and you will have to carry all the costs out of your own pocket.  The reason is that normally a lot of new properties come on the market at the same time.  Although there is demand for rental properties, people who want to move in must cancel existing contracts, etc.

 

With the number of properties on the market at the same time, there might be a temporary over-supply of housing.  That means that you might not be able to get your projected rent from the first month.  Which translates into cashflow.  But as the development fills up, market forces take over, so that in time you will get a market related rent.

 

Does that mean new developments are bad investments?  NO!  It just means that you must calculate the cashflow very carefully to ensure you can afford what you buy.

 

Existing properties cost cash upfront for transfer costs and often for renovations and painting.  Perhaps you will spend a similar amount on extra cashflow if you buy a new development.

 

So this is what you do:  before you decide to buy, you do your homework and determine how much you will have to contribute out of your own pocket every month (we have an excellent software package that does this for us).  If you can afford it, you buy the property.  And immediately you start putting the budgeted cash into a separate account.  In the case of an existing property you will have at least 2 – 3 months cash extra when it is transferred.  With new developments, you could have as much as 18 months worth of cash available.

 

So you see, if you understand the risk, you can manage it.

 

I would love to hear from you.