I AVOID these Properties in South Africa
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- Опубліковано 31 тра 2024
- I AVOID these properties in South Africa because chances are they will have a large shortfall every month.
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DISCLAIMER: I`m not a financial advisor and hence the content of these videos are for educational and entertainment purposes only. Investing is a risk related practice and should be approached carefully.
Do you think any of these are good deals ?
Here is what I did.
When my house was finally paid off, I found muself with an additional X amount each month. In todays time its tough to find investments that actually makes money, but I believe property is the best bet. In Pretoria east, a 3 bedroom flat goes for 1,2 to 1,4 million. I found one that was 960, and negotiated it down to 890. I calculated that with bond repayments, levies and other bills, it comes to about that x amount per month. So, if I dont have tenants, I just about break even. But now that I do have tenants, I keep using my x amount to pay for all expenses, and all the rent goes to my bond repayments on top of what I pay out of my own pocket.
This significantly reduces the amount of money I need to pay on interest, as at this rate, I could pay off the property in less than 5 years. So I might be paying in now, but in 5 years, I have an income, which I can then use with my x amount to buy another property.
Perhaps this is not the most profitable strategy in the short term, but I simply dont trust the returns on annuities to provide me with a decent, inflation related income once I retire in 20 years.
I generally stay away from apartments. Nomatter the price point, I prefer a fully separate home. This is your first video I have watched. I enjoyed it and found it very informative with only one question: Why 1% and how does that relate to positive or negative cashflow?
1% per month is 12% per annum.
Banks usually give an return of about 9%, and the current repo rate is 11.75%.
By buying a property, it needs to at least match the return you could get from a bank or else you could rather keep your money in a bank and get a 9% return risk free.
So you need to get a slightly higher return than you'd receive from the bank, to compensate you for the risk you take when buying a property.
Also remember that you wont always have full occupancy and you'd have overheads such as maintenance etc.
The 1% rule is very difficult to meet, but it is possible. However, you can still be profitable if you dont meet the 1% rule becuase you could put a down payment so your loan repayments would be lower than your rental income. And also, you get capital appreciation on the property itself.
@@muaazkader6402 Got it. Thanks
@muaazkader6402 Thanks for commenting and for sharing your insight. Really appreciate it. You make some valid points. Thanks for watching 👊🏻 😎
As a young black person 5 years ago I bought a house out understandings how renting work and the other finances like rates and transfer fees. I wish these things should be in the school curriculum and also include TAX RETURNS because we are clueless in the first year of employment that leads us making poor financial decisions thinking we on the right track. Please make more videos and we will support you.
Thanks for sharing. Our basic school systems are unfortunately failing us, and our government will never work on this because it teaches people to become workers and not work creators. I hope that this channel can give people the knowledge to improve their financial situation so that they can become work creators. Thanks for watching
So true, I learned a lot when I bought my first home. Things I wished I had known.
@noxlove2151 Thanks for sharing. I hope that the channel can help you and other people avoid mistakes . Although mistakes are invetiable, we should try to avoid the unnecessary ones.
Fr school teaches you to be obedient in society confirming to the norm . If you look at billionaires and millionaires who went to school they were the outcast or just the ones outside the normal norms had a lot of attention and was outgoing. School won't teach you anything useful except how to count
Grade 8 EMS has a chapter called National budget which teaches taxation, but then again which 14 year old cares about that?
A strategy that works very well. A Dutch friend has an apartment in Amsterdam, Holland, that he rents out. He had tenants squatting for over a year. A South African Afrikaans farmer also had a holiday apartment in the same block. They met one day while the farmer was on holiday with his family. The Dutch owner shared his desperation, because legally there was nothing he could do. The Afrikaans farmer went back to his apartment and returned with a baseball bat, and in half an hour he cleared the tenants from this guy's apartment. Problem solved. Ja, boat.
There's a similar system here in SA.
if this happens in south africa, you sign another tenant lease with a nigerian for the same property for short term on very good rates and a move out bonus, give the Nigerian and his friends your 2nd set of keys and they move in, turns out xenophobic racist dead beats dont like to share as much as they pretend they do…
Well done.my friend got bouncers and chucked out all the family from his house
🤣🤣... Thats the best way to get rid of freeloading crooks
😂😂
A friend of mine was in a similar situation of squatters. He called the EFF and they were out of there in no time.
And when they stop paying, you can't put the tenants out. So you don't get any income from the property. Don't buy any property unless you yourself are going to live there.
Thanks for sharing your opinion. And for watching the video💪🏻
Property does have its own risk like tenant vacancy or non payers. If you are not comfortable with managing the risk, there are other alternatives. Luckily, you can choose for yourself and invest in what you are comfortable with 💪🏻
And thats the main reason average people work paycheck to paycheck, believe in and RA to save them and NEED to work until 65......
Job security is an illusion and Also a risk and the stats of retrenchment vs tenants stop paying when having qualified and signed contract disagrees with your "god forbid risk / step out of comfort zone" approach 😂
SA laws really need to change. As this becomes more apparent, more tenants may see this as a 'hack' to blackmail you.
It's good in the western cape if you had invested up until 5 years ago. The rest of South Africa it hasn't worked out.
Unfortunately, prices in Western Cape are super high value clients moving their families down here.
@bankster2191 Solving this issue via "the law" is a costly dead end.
We simply have a team of scary forners to move in there since we have keys too. Sit on their couch, eat from their fridge... very quickly theres an understanding ;)
The culture in South Africa is dangerous, Repairs and maintenance exceeds the regular wear......and poor payment structure
Thanks Louis, this is the first time ive heard of this 1% rule and it makes 100% sense!
The only downfall i could see is that you can get a property for cheap, pushing you over the 1%, but it might be a property that needs a ton of work (Paint, Kitchen, Garden, etc) to get the maximum rental amount, so again you have to put in some cash, pushing you closer to the below 1%.
I guess the idea here is a longer term game and to find that "1 in a mil" property.
Cheers on the excellent content!!
Thanks Jean, appreciate the feedback, and thank you for watching. You have a good understanding of the rule now. However, once you have to inject cash, you dont use the 1% rule but rather use ROI calculations. This is where you calculate the return on capital invested. ( In this instance, cash used for renovations and transfer and registration cost)
If it passes the 1% rule and generates a good ROI, then you know you have a good deal.
The 1% rule is simply a quick and pretty accurate way to scan through deals. If it passes the rule, then you start analyzing it further. Hope this helps.
Thanks for sharing 🙌🏻😁
@@louisreynhardtcan you explain the formula further? I’m one of those who as a kid I could not memorise formulas in maths, usually I derive the complicated ones😂very inefficient but it made understand for life😊❤
If you could please try break it down further and the rationale behind it
Is it about how long to recoup?
@@louisreynhardtcan you explain the formula further? I’m one of those who as a kid I could not memorise formulas in maths, usually I derive the complicated ones😂very inefficient but it made understand for life😊❤
If you could please try break it down further and the rationale behind it
Is it about how long to recoup?
Lekker broe! Love your videos!
Nation building ja! Let's not wait on government to make things work...us everyday South Africans must just get it done. Lekker...keep the videos coming asseblief ❤🇿🇦
I discovered your channel and I've liked and subscribed. I'm also involved in property, and your advice has been incredibly helpful. Thank you. I currently rent out three properties in Cape Town, and it's quite challenging to break even on profits. I own 2 flats and 3 bedroom house. For those considering buying and renting in Cape Town, my advice is to handle everything yourself. I personally handle maintenance in my flats, including plumbing (replacing taps) and fixing electrical issues. For example, when my hob and stove broke, I purchased a second-hand stove and hob and installed them myself. I also take care of my own lease agreements and find my own tenants. Rental agents in Cape Town take a significant cut from your monthly rent(10%), which eats into your rental income, forcing you to put more money into your bond. Renting out property is a full-time job, and on top of that, I have a full-time job as well. To achieve success in property, you must be willing to be hands-on and put in work.
Great info. Thanks for sharing your knowledge and experience. Also, thanks for watching, im glad my content can help in some way 💪🏻
Whether you buy to rent (with levies) or buy to live in(with utility bill) ALWAYS take levies or utilities into account. my dad told me it is the 10% rule either way. Same thing in pink. PS: a small cottage that you can rent out is always a good thing!
I used this rule as a first filter when evaluating small blocks of flats in Jo'burg south. It allowed me to quickly separate the wheat from the chaff when I had to scan a large number of properties.
Thanks for sharing your insight and for confirming that this works for you, too. Thanks for watching and supporting the channel 🙌🏻 🙏🏻 😀
my 1st property was a complex we lioved and paid the bond off for 5 years. realised quickly that when renting it it is almost impossible in complexes to make a decent profit margin. my 2nd was a 3 bedroom, 2 cottage house in low to fair condition the double storey cottage paid 90% of the bond. got divorced and i got the house with debt, by using some conversion i now earn roughly R25k nett, with R12jk bond, full solar, borehole maintained fairly grossing roughly R6k while living there
Thanks for sharing and well done for sticking with your goals 👏🏻
The 1% rule is basically the same as your return on investment per month. Multiply by 12 and your annual ROI is 12%. This must be higher than the bank's loan interest rate in order to break even. If the bank loan rate is 10% then you are 2% better off but then you still have allow for recurring expenses on your property which will eat away at the 2%. So you have two options; buy property and let at 12% or invest in the money market at at least a 12% or return to break even. Where are the risks? Property could need a lot of maintenace and it could remain unrented for periods of time which is riky in SA. On the other hand investment in the money market is subject to interest variations and inflation which could reduce your return. So, as Louis said, do your homework as there are also other factors such as taxes and caital gain.
Thanks for sharing your insight. This is an interesting way to explain it. I hope people will notice your comment. I think risk should be compared to reward. The high interest rates make it much easier to get good and safe returns, so, like you said, why would you risk it in property? The only reason would be if you can get much better returns, like 15% or 20% or even higher.
Thanks for watching and for commenting 😁💪🏻
The difference is, if you buy a property, it should increase in value over time while you getting a return in the form of rental income.. rent also goes up each year.. If you take the same money and invest it in a money market or other option, you will get the monthly return, but your initial invested amount does not increase, unless you compound it by leaving your interest.. If you take out the interest every month, their is no compounding, whereas in a property, you can take out your rental every month and the initial investment being the property still continues to grow..
With an investment at any financial institution, their will be fees as well and sometimes taxes to be paid.. With buying property you will hav the odd maintenance and rates, so these 2 cancel each other out in a way.. the main thing with property investment is SA currently is location. If you buy in an area that becomes crime infested, close to informal settlements, places that do not have property infrastructure ie water, sewage systems, areas with dysfunctional municipalities, far from schools etc. you may find that they can even decrease in value..i know of places that were sought after 20 years ago that are now run over and you cannot sell even if you gave it away.. that is the sad reality..
@dilochetty9332 What an excellent summary. Thanks so much for taking the time to share your insight. I hope that this comment reaches a lot of people. Thanks for sharing and for watching the video 😁💪🏻
This channel always has gems and hecks that industry insiders guard dearly. Thanks, Mr Reynhardt.
Means a lot my friend. Thanks for supporting the channel 😁
Hierdie 1% reël Werk terloops net in Suid-Afrika, moet nie verwag om eiendomme bv in Europa te kan koop vir 100 maande se huur nie. Ek bly tans in Duitsland en hier kos eiendomme gewoonlik omtrent 250 maande se huur. Soms is die hoeveelheid wat n verhuurder mag vra deur die munisipaliteit beperk, dan kan die verkoopsprys selfs 300 maande oorstyg
Dankie vir jou insette Johannes ek stem met jou saam. As ek dit reg verstaan Probeer Europa juis keer dat mense investment properties koop en daarom is die mark heeltemal anders. Hulle verkies dat die eiendom eienaar self in die huis bly. Die reël kan werk in sekere areas in Europa of self in UK of US. Dit hang af of jy single let of multi lets doen. Dit is baie skaars dat single lets die 1% reël sal deurkom selfs in SA. Daarom is die Multi let strategie beter vir cash flow. Dankie vir jou comment 😁🙌🏻
And still nobody questions the validity of the Reserve Bank's role in inflation and poverty creation..
The reserve banks role is what keeps us from becoming a Zimbabwe. Their mandate is to keep inflation between 3%-6%. They achieve this using interest rate adjustments.
Great to see that the channels last few videos have reached over 150,000 views collectively in less than a month. Well done Louis 👏
Thanks my friend, appreciate the comment. I've been feeling the support lately. Thanks for watching 👊🏻 😎
Its time for the investors, property industry at large, estate agencies to get into permaculture. To partner with practitioners who can add value to properties, in the way of energy efficiency, storage and renewable capacity; create water bodies that insure water for agriculture, industry and human settlement as well as moderate extreme temperatures and life boat for ecosystem health; Regenerative Agriculture where Grazing is managed to improve soils and permanent perennial Plant systems that provide a lot of food for animals and people; tree systems for windbreaking, holding nutrients from erosion; good roads and paths with planned access. Generally to create a resilient situation. The value of land that is improved in such a way increases exponentially as it's fertility increases, and costs reduce with correct design to plan for disaster weather of all kinds which the insurance sector is intertwined in. The previous models are quickly becoming obsolete. Can a property catch it's own water and store it, can it produce its own energy? Can it withstand flood, drought, fire and hurricanes? Does it produce food, fuel or fibre? Is it going to be resilient or rely on failing government services?
Very Marginal, cheap, degraded properties can be totally turned around and be made into valuable assets with the right foresight and design approaches.
This is becoming more and more important. I had a permaculture teacher sell his suburban home for 1.5x the average value in the area with clever design and low cost setup that will save the new owners in the long term.
Something else to consider is that repairs and maintenance on rented properties also eat into that revenue stream unfortunately. Thanks for the video, wish I had known this 6 years ago :/
It's absolutely truez thanks for sharing.. This is something you should calculate with your ROI calculations. This is where you determine cash flow or shortfall and account for all the expenses. Hope these videos can help you now. Thanks for commenting
Thank you so much for sharing Louis. I’m just so glad that finally someone finds Bloemfontein worthy enough. It just lands differently & is so helpful as this is my hometown & where I’m looking for opportunities. Jhb & Cpt aren’t everything. You r gained subscriber & I’m looking fw to more like videos.
Thanks so much for your comment and possitve feedback. It makes me happy to hear it can help you and guide you. I love Bloem and think it's one of the best cities to live in and invest in. Thanks for supporting the channel.
Hello. The Al Gore rhythm brought you to my recommendations.
15 years ago, my dad's 6 acre property in Midrand was worth R6 million. Since then, two cottages were added. He passed in January, and we had the property evaluated.
R 6 million!
What happened to "property as an investment?"
I'll stick to gold. Always doubles in value in 5 years. guaranteed.
I'm sorry to hear about your loss.
It Depends on who valued the property. I would get a second opinion. The estimated value is not necessarily the market value. The value is what someone is willing to pay. Im sure you can sell it for more. Thanks for sharing 💪🏻😁
@@louisreynhardt Thanks for your reply and kind words. We accepted a good offer from a friend of our neighbours two weeks after dad's passing. (No estate agent fees!) We just had our gas and electric COC done, and all legalities are complete. Now merely awaiting payment. Meanwhile l am living rent free in the house, while playing in the garden, turning a hedge into a locomotive with cherry tomatoes growing up the sunny side, and growing vegetables in every available space.
@rolandoscar1696 Pleasure my friend.
Seems like a pretty stress free life. The cherry tomatoes sounds amazing. Enjoy it, it's great when you can do what you love. Thanks again for watching
@@louisreynhardt Thank you for educating us. Please could you do a program that lets sellers know about admin?
1. Is the electric COC no longer printed on paper? Our electrician informed me that it's all in pdf format now, though our lawyer requested l hand over the certificate when handing over the keys. I just WhatsApp-ed our lawyer a few days ago, and am still awaiting his confirmation.
Ensure the electrician has a wireman's licence with his name printed on it, not the company's name he works for. We had a chancer try his luck.
If the electric fence is not working, is it up to the seller to repair it, or else must they remove all evidence that the fence even existed? An electrician told us this was required by law. We sold the house voetstoots, and informed the buyer that the fence is damaged. He agreed to buy the property as is. Saved us R40 000 to repair!
2. Also advise sellers to keep a record of the bond account number, even though it was paid up 20 years ago.
3. And tax records; no taxes are owed by the deceased's estate.
4. Proof of payment for rates and electricity. (We only have borehole, so no water bills.)
I'm sure l missed a few points.
I calculate the repayment at prime + 3 to be safe. If the property meets the 1% rule at that rate then I know that its good especially since I get prime minus for all my transactions.
I have a long term plan to have atleast 10 peoprties before I retire to have a passive income when I retire.
The properties I own currently generate a negative cash flow currently of R700 to R1000 pm due to rates, levies and insurances but this will change when the first property is fully paid since I will compound the repayment on the other properties
With this methodolgy I hope to have atleast 5 properties paid off in 15 years and all 10 paid off before I am 60.
Great Channel. Keep it up.
Thanks so much for watching and for sharing your tips. That's a great way to create an extra layer of protection. If it works with Prime +3, then there's a lot of margin of safety. I hope that you will reach your goals. I think retiring with 10 paid rentals is a great passive income and puts you in a good financial position. Thanks for sharing and for supporting the channel 💪🏻All the best
I had the same plan, but the problem is next year your cash flow will be even less. The rent increace cant keep up with levies, insurance and taxes, not to mention bad rent and damage. When i started the ROI was at 8-10 % , last year my avarage was 5% . That is just my thought
You have a great channel! Welll done and thanks for sharing this with 🇿🇦
Thanks so much. Thank you for supporting the channel. All the best 💪🏻💪🏻
Per toeval op die video afgekom en so dankbaar vir jou raad...skenk juis oorweging om 3slaapkamer huis in Bloubergstrand te verkoop en n woonstel in Gansbaai te koop weens my ouderdom en finansies, maar is huiwerig oor heffings ens. Gaan beslis jou n epos stuur 😊 Alle voorspoed met jou videos
Hi Anne-Marie,
Baie dankie vir jou boodskap en dat jy die kannaal ondersteun. Ek hoop dat die videos jou kan help om die nodige kennis optebou voor jy die besluit maak. Dankie ook dat jy deel. Voorspoed en alles van die beste.
This is amazing and so informative. I love the simplicity of the maths too. Thank you. Instant follow.
Thanks so much. Really appreciate the feedback. So glad it can help 🙌🏻😁
love the content ...can you make a video on how to transfer houses ...and how to registers a business to own own multiple units
Thanks for watching. Sure, I'll look into this and see if I can cover those topics. I will be launching a course soon covering all these basics as well as the advanced parts of investing. Let me know if you would be interested.
Also include transfer cost, initial setup, yearly accounting fees, tax on profit, maintenance (tennants destroy stuff), the cost of your own time and you'll see you'll never reach the 1%. So its not "Avoid these properties in SA", it is "Avoid properties in SA"
Thanks for sharing your thoughts. You are 100% correct to include those "expenses," but it's not included in the 1% rule. Like I said in the video, it's just a quick way to find potential deals to then do Return on investment calculations with the expenses you mentioned. Again, that is why leveraged is used to minimize your own money invested, which will increase your ROI.
Jip, im out of the property market after 25 years. I wount even buy myself... renting someones place and they can worry about rates and taxes, repairs and the state of service delivery. When you dont like it there anymore , you cant just move on.
Oh and get a third party to install and operate your tenants’ utility costs.(I.e the tenants pay prepaid and the 3rd party reimburses you your tenants electritcity). BEST advice from Dad. This covers the volatility of electricity prices and ensures you dont get a fixed rental in instances (like in SA) when you cant predict utility costs.
Please explain further 🤔
Finaly !!! A person who doesnt feed you a lot of bull💩 and say it like it is 👏👏..
I am in property investing for 25 years and its is not worth it any more... the ROI in a money market fund makes more sence. The problem is that rental increase cant keep up with rates and taxes and value is also not increasing. Not to mention rental losses and damage to propertys.. on 18 propertys , paid in full i was avarage only about 5 % ROI.... I am glad i did this , but it is time to move on
Thanks for supporting the channel and for the feedback. I would like to add and say that at least you tried property and now know that it does not work for you. A lot of people simply never try or take risks in life. Thanks for sharing your insight. All the best
Dankie Louis. Help baie! 👏👏
Bly dit kan help 🙏🏻🙏🏻
You're becoming my favorite UA-camr ... thanks for the continual education! 🙏🏾🫡
Thanks my friend for the massive compliment. I really appreciate it 👊🏻😁🙏🏻
I usually don't subscribe to channels, but 2 mins in v around I'm subscribed! Thank you! This is educational.
Means a lot. Welcome to the channel my friend. Keep learning. All the best 💪🏻 😁
@@louisreynhardt thank you for the warm welcome! and all the best for this channel!!!🙏🏆
@@louisreynhardt thank you for the warm welcome! And all the best with content and this channel!!!🙏🏆
I am lucky in that regard, I bought a place up in JHB for a good price, and lived there for a about 10 years. Moved down to cape town, at the moment the property is costing me money, but that is because our lovely municipality had a leak on THEIR side, and billed me for it. So besides that I am pretty much where I should be, thanks for the confirmation.
Thanks for sharing. As long as you can hold onto the property. Look at it as a pension fund. It is definitely a longer-term game. Most people get frightened and sell in those cases, which defeats the point. Luckily you still own the property. Well done !
Thank you very much for a great lesson passed here . I’ve really learned a good strategy and I would like to practice it ?
Glad you can learn my friend 💪🏻💪🏻
This is so informative, thank you so much 🙏
Thank you for watching and for your feedback. Appreciate it 🙏🏻 🙌🏻
Great video. Thanks. I've been through all this, good to see someone bringing this to the ill informed.
Thanks for watching. Appreciate the feedback 🙏🏻 😁
Thank you, for sharing this valuable insight.
Pleasure my friend. Thanks for the support 🙏🏻
Just a heads-up when selling. I was advised to avoid selling to a property developer. Though they may pay your asking price, you will wait 5 to 10 years before you see any money- citing bureaucracy as their excuse.
Thanks for sharing. I'm sorry to hear about your experience. Hopefully you've received the money by now. I'd suggest using a good conveyancer for these transactions.
Thanks for watching 😁💪🏻
@@louisreynhardt Gavin Mostert is our attorney. He's pretty good.
Excuse me, what!? 😳
@@ferzinhaN" Excuse me, what?" what?
Schools are busy teaching languages at matric level up to paper 3. For no apparent marketable reasons. No value at all.
Sad but true
I bought a house in Cape Town which had an additional one bedroom cottage on the property. My bond is R25.000 per month I rent the cottage out for R7.500 per month. As you can see this is a big help.
Wow Great way to reduce your expense burden. Thanks for sharing 👊🏻 😁
Life is expensive
You bought in Cape Town. Even if you just missed the 1% rule it wil be ok. Capital growth in Cape Town currently is insane. The sooner you buy here (especially city of cape town region) the better. It will always grow significantly
@ruanbester2473 Thanks for sharing. Calling it insane is definitely accurate. As long as you can afford to hold onto the property, it can be a great way to build wealth while reducing tax 💪🏻
@@louisreynhardt exactly. You know Louis im a first time buyer, and I know the intrest is high. Im not to phased about it cause now I can affortd this high rate. If it goes down next year (hopefully) I will be financially secruered as I believe I bought at the peak. I think it might go up 1 once later this year. I took that into consideration
Thanks, Louis for sharing this information. Definitely, this is an eye-opener. Looking forward to more videos on property investment.
Thanks for watching my friend. Appreciate the positive feedback. Will keep posting these types of videos. 💪🏻👊🏻😁
❤@@louisreynhardt
Thanks louis this is eye opener I m planning to buy a house in joburg my brother and sisters bought there houses long time . Ago .no one is helping me when I ask question about the process and risks thank you
I'm glad it could help. The goal is to share this information as far and wide as possible so people can avoid making these mistakes. Thanks for watching nd for supporting the channel 🙏🏻😁
Very insightful, thank you!
Thanks for the feedback. I appreciate it 😁🙏🏻
I made my money in property knowing all this, but I worked around it. I just increased the deposit. If you take property investment as a business that requires raising capital and not only depend on bank loans, you should be fine. I’ve put in as much as 30% deposit in other instances and I’ve never not made a profit from renting
Great rule of thumb. Thank you for contributing to the channel. Appreciate your input. All the best 🏆 👍
The only time that I think buying to let properties is a good idea these days, is if there are multiple dwellings on the property (i.e. house + flat) that can be rented out. Just ensure that the entrances are split and the water and electricity is separately metered. The total rental income must cover the monthly repayment, insurance, rates and taxes plus extra profits to account for maintenance, otherwise the investment doesn't really make sense in the long run. If I can't get a property like that, I'd rather look at alternative investments other than property.
You make some great points. Overall, single family homes are difficult to run as an investment. They are very rarely cash flow possitve, so multi lets are the way to go for higher returns. Thanks for your input. All.the best
This is very helpful Bruv Dankie
Pleasure my friend 👊🏻😎
Awesome work,, Thank you. Very insightful
Thanks for watching 👊🏻 😎
If I had to do things over again, I would not buy property. Renting it out can bankrupt you because tenants destroy your property or squat, and the law is on their side. If you live on the property it is better because you have a right to be on your own property, whereas if you don't, you won't be allowed to enter, even if they don't pay rent or damage the property. It can easily cost R100000 in legal fees to get them out, plus years of lost income, damages, and municipal bills you need to pay while they refuse to leave. Also, electricity, rates and taxes, and maintenance, insurance, and other expenses and increases are insane.
Save as much money as you can each month, buy a small, realiable car and find a small place to rent where you have some freedom and no levy. And don't buy unnecessary rubbish because it is very difficult to get rid of eventually.
Thanks for your comment. This is some really good financial literacy advice. This is something i talk about in my property course. Living below your means, especially when you are young, is very important. Thanks for sharing 💪🏻💪🏻
Thanks Louis, good information well presented.
Thanks so much for your comment. I'm glad it can help 😎👊🏻
This is effectively setting a gross yield requirement of 12% pa. Yield should reflect risk. A well located property should have a lower yield because its less risky as it protects the capital value, its reflects the old property rule of location location location. On the rental side there should be a bias to 1 or 2 beds because they let faster compared to family units which is more secure income. Risk is personal and changes from person which means each of us will put a different Value on a property. The Price is set by the market, the equilibrium of supply and demand . The 1% rule is also reflected in the laws of economics for Price and Value. Simple rules work because its harder to get it wrong.
Thanks for your insight and for sharing some great information. I agree that keeping it simple makes everything much easier, and again, it has a track record that shows it works. I love this rule, and it's a great way to quickly work through potential deals 💪🏻
No freestanding house is a good deal. It's just a major financial drain. Always something to repair.
I'd stick to flats and townhouses. Then use your calculations.
Thanks for sharing. Its true, full title properties, especially the older ones, always have a lot of repairs an maintenance.
Interest rates too high and most renters=rubbish (dont pay, damage your property and very difficult to get them out)
That's why the most important part is your tenant vetting process , I can not stress it enough. Thanks for watching 😁👊🏻
So simple and easy to understand. I dont think I'll ever be able to afford a property but this was great
Thanks for watching. I would like to encourage you to learn the skills to acquire property. It starts with your mindset. Do not discourage yourself . Rather, ask how you will be able to afford property. Anything is possible if you put in the time. Keep on keeping on my friend. I hope this channel can help 💪🏻
Great educational content Louis & keep it up Bro.
Thanks a lot my friend 💪🏻😎
Its shocking how much cheaper houses are outside of Cape Town. Seriously.
Having said that, would I move out of Cape Town? Hell no.
Its Crazy expensive in CT. The market there is a bit of a sh#t show. CT IS absolutely stunning. I can imagine you dont want to move somewhere else. Enjoy my friend 💪🏻💪🏻
Thanks for these video bro i hope your channel grows
Thanks my friend this means a lot to me 🙏🏻🙏🏻
Great stuff and easy way to explain this subject
Thanks Andries appreciate the feedback. I'm glad you can learn on the channel 💪🏻
Goeie idee - natuurlik is die onus op die belegger om verder navorsing te doen oor enige potensiële eiendomsbelegging.
Tans koop ek leë erwe, bou self (insl. sonpanele) en verhuur dit uit.
Dankie vir die inligting. Jy is 100% reg. Mens moet probeer om die risiko te verminder deur om soveel huiswerk as moontlik te doen. Dankie vir jou insette.
Your analysis is very simplistic. Let for pension and let kids inherit. Bloemfontein is hardly an investment area. Lots of people buy for cash and let. I bought properties as i needed and then scaled up, not selling what I had. Now my kids can inherent and avoid A LOT of capital gains and estate tax, while I get a good inflation linked pension A 3 bed for under 1.7 Bar is a lunch bill, not a property investment. Greetings from the Winelands and on the water living on the West Coast. Jy bestee te veel tyd by Naval Hill.
Thanks for sharing, Andre. Appreciate your input. I agree, property is generetional wealth and can help your kids alot some day. As well as yourself when done correctly (pension fund)
Sounds like you are living the life. Enjoy it my friend 🍷
My parents bought a big ass house 4bedroom garden 60m x 60m for 1.1 mil . In 2012
. But we did have alot of construction done ourselves
Thanks for sharing. It helps if you can do some of the work and if you actually live in the property 💪🏻
@@louisreynhardt I've been living there for past 12 years with my siblings and parents
Definitely been doing all the tiling and building renovation etc around the house
Go look what you get for R1.6m in Cape Town then see how the DA fucked up property prices that your average worker can’t afford to move out of the cape flats
WC is a completely different market yes
This is really good simplified way to compare deal and property investments. For those out there, remember that after 5 years of ownership, your purchase price will remain the same while the rental income is likely to have increased thereby changing the nature of this calculation.
As always, property is a longer term gain with a shorter term gain. Id use this method to identify the best deal and then grow your portfolio from there. Dont be shy of doing this method.
@Louis, nice video - what are your alternative suggestions?
Thanks for your insight and for confirming that the rule works for you too. I think it's a great way to quickly sort through deals .
The last part of your question, did you mean what are other investment alternatives or specifically property alternatives? I focus on mulit let strategies or lower to mid income properties.
Hope this helps , thanks again.
Great video! Very informative. Any thoughts about buying or building with the intent of doing short-term rentals, e.g. AirBnb, VRBO., etc.? I have a vacant stand on the outskirts/suburbs of Cape Town that I plan to build on. Does the 1% rule apply to short-term rental scenario?
Great questions
Cash flow projection for short-term rentals is a bit more difficult to calculate, but the 1% Rule is certainly a rule that you can use. RoI will be the main calculation to use. Short-term rentals work very well when you have a good location. So, the best tip would be to make sure there is demand for the rentals in that specific area. Market research is very important here.
Goodluck 💪🏻
Dankie Louis very interesting and appropriate.
Thanks so much. I'm glad it helped 😊 😁🙌🏻
When you're not using an agent its a nightmare to recover missed rent payments. Also take in account stuff like geysers, leaking pipes, leaking roof bla bla. Make sure you have good insurance.
These are expenses you need to account for in your ROI calculations. Property is definitely not risk free you just need to account for the risk.
Thanks for sharing your insight.
@@louisreynhardt True and the 1 percent rule basically boils down to having 100 percent of your initial capital(cost of the house) + interest covered by rental income over the full term of the bond. So you want the resale value to be 2 - 3 times at the end of the investment period. This should mitigate expenses, inflation and CGT that you have to realise at retirement or whenever you want to "cash out".
Thanks for sharing this Louis 🙌🏾🫡
Pleasure my friend. Thanks for watching 👊🏻 😎 🙏🏻
You will be hard pressed to find a peopert in cape town where this works. You will have to hold onto it for a few years while the rent escalates before you hit the 1%. So long term a good investment but you will need time to reap the rewards
Great Point Sebastian, thanks for sharing👏🏻💪🏻
Can you recommend a few books or articles that go in detail on property investments?
There's not a lot of local material, and that's why I decided to launch the channel 2 years ago.
Some good books you can try are.
THINK AND GROW RICH
ALL THE BOOKS FROM JASON LEE
LAURENS BOEL
RICH DAD POOR DAD
RICH DAD POOR DAD CASH FLOW QUADRANT
I've also launched an online course that you might like.
To secure your spot, simply click payhip.com/LouisReynhardt and follow the easy registration process. Don't miss out on this opportunity to get Early bird discount
Use the coupon code : EARLYBIRDCOMBO to get 10% Discount on the Mentoring option.🤑
Use the coupon code : EARLYBIRD to get 20% Discount on the Full course.🤑
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If you want to check out all the free content under my real estate playlist. Hope this helps.
Thanks for the great content. I wish I knew these things before purchasing my first property. I'm currently living and working in China. I purchased an apartment in Cape Town about 2 years ago. I have been renting it out for just over a year now. However, with the increase in interest rates and increase in levies, I am now under the 1% rule. Do you advise that I sell the property or wait? I am hesitant to sell with the fear of not getting another good deal in this market.
Thanks for your comment. It's okay to make mistakes. As long as you learn from them. I won't recommend just selling the property because then you lock jn your losses. If you can afford to keep the property long term, you will probably make money. I would just recommend building a healthy reserve and focussing on gaining the right knowledge for your next property. Let me know if you would like to do a one on one . You can pop me an email at louisreynhardt@gmail.com 👊🏻 all the best
I love this channel...am 26 and just getting into property investment. I will be learning a lot here
Thanks my friend and welcome 🙏🏻 💪🏻😁
Thank you so much for the video
Pleasure my friend 🙌🏻🙌🏻😁
Honestly, the best property to rent out is a paid off one. Either you live in it yourself and move on from there. Or you make sure you can pay off the apartment in less than 10 years to not have a major impact on your cashflow.
Another thing is that rentals is a real sh1t side hustle, either you invest your life into it and when you are 55 and have 3 or 6 flats this becomes another full time job, or you sacrifice a lot of your income to an agent, because even 1 flat will take a lot of effort to run if you don't have an agent. Property is a good investment IF you use it yourself, like a holiday home. But honestly, I will not do more than 1 rental house, it takes a lot of time to do things yourself and actually make money. Better off investing in your own property, like a small farm, or a industrial rental, where maintenance is usually less of an issue. But residential rentals isn't very lucritive from my experience.
Thanks for taking the time to share your thoughts. I really appreciate all the different opinions, and it certainly helps other people to consider these opinions too. It's always wise to do the necessary homework first. Some people see their primary home as their biggest asset, and other can see it as their biggest liability. I guess it all depends on your personality, age, risk apetite, and end goals. Thanks for watching 💪🏻💪🏻
I'm into real estate myself but have convinced myself that buying in South Africa could only ever be a lifestyle property. Could you do a video on the market in general from an investor's perspective? The math didn't add up for me - average 9.95% ROI, with currency depreciation almost as high as that and if you need financing, you're hit with crazy interest rates.
Every way I've worked it out, it ends up losing money. ZAR has been declining for decades, so I don't see that changing. Infrastructure seems to be in decline, crime increasing, and the political situation seems tense.
Of course, the market in South Africa seems rather slow moving, which means a clever buyer could potentially take advantage of an impatient seller.
Great comment, and thanks for sharing. Property is a great asset class to invest in using leverage. This means you dont have to use your own cash ( you can re invest your cash wherever) using leverage also keeps up with inflation over the longer term because most cost of property tend to rise with inflation. It's important to focus on deals that work. Getting a 10% ROI is good . If you start considering the principal pay down from your tenant and longer term appreciation, it looks a lot more compelling. It's not the best vehicle for large short term returns, but it is a building block for wealth creation and considered a pretty save investment over the long term.
Also, yes, the cheaper you can buy property, the better it is. High interest rate environments can present a lot of good opportunities for those who are patient.
@@louisreynhardtover the long-term? Look at what the "long-term" means for Zimbabwe. Expropriation without compensation, high unemployment, poor law enforcement, crime, poor service delivery. Who are you going to be renting to?
@IAMALLMUSIC Until that happens, I will be renting out to people who need homes. The rent system will never fall away. Even in places like Zim. If you are afraid of something like that to happen, then you are welcome to invest in what you believe in. I'm not forcing my opinion onto you. Just simplly sharing my experience.
Please help me connect my mic. I purchased the same mic two months ago and struggling to get it to record. What software are you using, and do you have your sound card connected? Thanks in advance.
New subbie ✌
Welcome!!!
I dont use the sound card. You should be able to just plug it into your computers mic jack. It should show you a pop up where it picks it up. It might be that your sound drivers are outdated or that you have it in the wrong jack
Hi, you have to think about things. The reason the properties is still for sale and to rent on property24 is because they are overpriced for the conditions now. You are looking emotionally at the properties. Nice propeties in good areas sare many times not a good investment. You have to look at the IRR of the property and include all costs before making an unemotional descision. Also turning a property into a good one and renting it out at competitive prices works. Go talk to JP there in Bloem. You have to do the calculations and put in some time effort, et. and then it works. It's not easy and you have to learn a lot so that is why most are not doing it, but it is worth it.
Thanks for sharing and making some very good points 💪🏻💪🏻
You must buy when the interest rate is at its highest but you must also have the money in cash😊that way you get the best deal..also you must have a connection in cheaper accommodation so if your tenants cant pay you can offer them more affordable accommodation😊
Some great tips, especially the cheaper accommodation option. 💪🏻💪🏻 Thanks for sharing, and also, thanks for supporting the channel.
@@louisreynhardt I always find it interesting the tenants who can't pay will never go for the more affordable options... 😂
Eish, people living above their means. They are trying to impress people they dont even like. 🙄
Just subbed to your channel my good sir God bless you.
Thanks for the support. Welcome to the channel 🙌🏻💪🏻
thats less rent than a studio apartment in cape town
CT is a completely different market on its own 🤣
How mucch is a good farm of say 1000ha in Limpopo in a good area roughly
Depends on the exact area and facilities, but I would say anything above R10m
You hardly make a profit with single letting . Most investors make money on time of selling the property but not on monthly rentals, I believe everybody knows that . That 1% rule his talking about is not easy to get to , chances are your property will be expensive to tenants and youl stay vacant for long . There’s no way you’ll get 1% rule and still have to pay levies and municipal rates and taxes and home insurance. It’s very difficult. You won’t make a profit but it will help you pay less on your home loan because tenant will be paying you some monies to cover up your bond . Don’t ever think of positive cash flow on single letting just take it as extra money to pay extra on your home loan .
You make some great points. Only a very small portion of single lets can cash flow multi lets are the way to go if you want to focus on cash flow. The 1% rule, however, is possible to achieve with both, but it depends on your area.
Do you not factor in any transfer duty into your calcs?
Only if it's abobe R1.1m
I use the ROI or cash on cash return calculations to do this so it doesn't form part of the first rule. Check out my real estate playlist on the channel to see examples of how I do this. 💪🏻💪🏻
This is amazing content, thanks Louis 🙏🏾
Thanks for the feedback and for supporting the channel. 🙏🏻🙏🏻
IMHO, the 1% rule can guide you towards possible rental income, but seldom works out perfectly. One has to take into consideration multiple factors such as the current interest rate. The question one has to answer is: Compared to your rental, what do properties on the market offer in terms of paying that same amount of monthly instalment should people decide to buy? If the property you rent out does not offer MORE than what a property in a similar monthly instalment bracket offers, people would be inclined to purchase rather than to rent. I've been renting out properties for the past 15 years. Just sharing my experience.
Thanks so much for your input. You make some great points. The 1% rule is only the first step of your calculations. ROI is where you determine all the knitty gritty stuff. Thanks for sharing your experience. Im sure many viewers will benefit from your comment. All the best.
did I miss something, rental monthly income divided by purchase price must be 1? that means you pay your property off every month from rental?
No, When it passes the 1% rule, it just means your deal might cash flow at the end of the month. Meaning after all of your expenses you will have money left over.
Thank you very much man. Thank you
Pleasure my friend 🙌🏻
I am just curious about a nuance of this calculation. In calculating the 1% rule, you only subtracted Levies, Rates and Taxes to get to your monthly income. What if your property is bought with a mortgage? Subtracting the mortgate will never bring you close to the 1%. Does this rule of thumb assume that you purchased with cash?
Great question Willem, the 1% rule actually does not include any expenses. It's simply the rental income divided with the purchase price.
Once it passes the rule, you will do your ROI calculations where you deduct all those expenses. I just used it as an example in this video to show that even though it passes the 1% rule, it still doesn't necessarily mean it will be cash flow positive. Hope this helps. Thanks for watching 👊🏻 😎
@@louisreynhardt Cool thank you, that is clear.
I have owned an apartment in the Cape Town CBD now for the past two years, and I am preparing to do my first refinance now to complette the entire BRRRR cycle. The apartment has grown in equity by 125% of it's original purchase price since I purchased it in covid - your videos made me realise how I can get access to this. Thank you! Though Bigger Pockets have been a great source of information, I love your content, as it is better tailored to the South African context. Keep up the good work.
@willemsteytler2620 Well done man, hope that you can vet access to all that equity. It's insane to think about, and above all, it will be tax-free. Thanks for the massive compliment and for supporting the channel. All the best 💪🏻
Super useful info thanks 🙏
Pleasure my friend 🙌🏻 😎
1% rule is still good but not good enough in SA. As your example with sectional titles shows you need to consider that “second bond” before you do anything.
You are right! But that's not what the 1% rule is for. Once it passes the rule, you then go and do your ROI calculations 💪🏻💪🏻
Thanks,i should create a website or app that calculates this
Great idea 💡 👍
If i may ask ususally students that share the same bedroom in Bloem (Willows or Universituis) how much does each student pay? Is that inclusive of water, Electricity, & Fiber?
Great question! It depends on the Universities and whether or not it is private or accredited students. Private is easier, but more risky. Acredited is much harder but more rewarding. It ranges from R3000 -R3900 per bed and then you need to include: Wifi, water and electricity and cleaning service's
Hope this helps 🙏🏻
@louisreynhardt Thank you for the insight 🙏 😊
Thank you!
Pleasure my friend 🙌🏻
Hey Louis thanks for the advice. How often do you find deals that actually pass this rule? I don't feel like I can find any?
Thanks for the feedback. Quite often, actually. But it's difficult for single let properties, and with high interest rates, it doesn't always work even though it passes the rule. One thing that helps is making lower offers and knowing the rental market in your area 👊🏻
@@louisreynhardt thanks for the response 😀 what do you mean by multi-let properties? Does that mean renting out each room in a property
Great question, so yes, it can be one property with multiple flats(bloxk of flats) or one property with multiple rooms to let or sometimes even beds to rent. This is how you can increase your income and keep your expense in line. It does, however, come with its own risk and rewards
Insurances? Property maintenance? Tax on rental?
Great point. It forms part of ROI calculations, not the 1% Rule... like I mentioned in the video, it's just a quick way to sort through potential deals. Then you do your in-depth analysis. Igine having to do ROI on every deal you see. It will become a full time job. Thanks for watching
Thank you very much.
Pleasure Mark, thanks for watching 👊🏻 😎
Property has low margins or negative margins while you still have a mortgage. Only once the bond is paid off do you get bigger returns.
Thank ls for sharing.💪🏻 But this is not necessarily true with all deals. I do agree that most people and most deals have low margins. But with the right knowledge, you can get great returns. 💪🏻💪🏻
Does your 1% rule mean that if rents and property prices were to remain fixed (or more realistically, that they both increase by the same rate over time) then the property would be paid off theoretically in about 8.5 years? Then taking into account all costs like taxes, rates, levies, and routine maintenance over time, this period could extend to about 10 or 11 years?
Yes and no, what you are talking about forms part of the 72 rule. The 1% rule is simply a rule to scan through a deal quickly and to sort through multiple deals in a short period of time. After it passes this rule, then you start doing your homework. Hope this helps.
This video was very helpful, it's an investors gem.
Thanks my friend appreciate the comment 🙏🏻
Good stuff. Thanks mate.
Pleasure my friend , thanks for watching 👊🏻 😎
I stay in the Western Cape and I am looking in buying property for a investment but when I make the sum 90% of the time it's below 1.
Unfortunately WC is a completely different market. The only way you will be able to pass the 1% rule is with multi lets 💪🏻
You can’t make money in the western cape from rental property because the purchase price is too high while you can only charge up to so much rent. You make money when you sell the property ( If you bought it before 2019)
Love this! Thanks
Pleasure my friend. Thanks for watching 👊🏻 😎
what if you had the money to buy the property outright - and then rent it out? Would that be a good strategy? Or buy two places both with 50% down (smaller mortgages)...?
Great question! Fortunately, I have the funds to buy cash but still decide not to. The main reason is ROI(return on investment). The more cash you invest, the lower your return would be.
Dont get me wrong. it's not a bad strategy to inject enough cash to receive a decent cash flow with a lower loan amount. It just means you will be able to buy fewer properties. It all depends on the strategy that you choose and your risk apetite.
Most people put down large deposits on average deals and end up with a 7-8% cash on cash return.
At this stage, you can get better yields from money market accounts, and your money is liquid and accessible. Hope this answers your questions 😁🙌🏻
Two smaller properties preferably houses not flats you want to avoid levies. Even if you have to do some work on those. Its difficult to let a big house/flat, plus you can sell one when you need cash.
@rorirory121 Thanks for sharing man, I think it ultimately depends on your goals and risk apetite. I dont live in Capetown but know many mutli let and studdent accommodation investors who are doing very well. Those are more advanced strategies, though, but it's always intriguing to see how much different the market in WC is. Definitely not easy.
Thanks for sharing this with me. How do I contact you
Pleasure my friend. You can pop me an email at louisreynhardt@gmail.com 👊🏻