Best thing I ever did was paying off bond earlier, gave me peace of mind and helped me navigate the uncertain times. Agree not a one size fits all scenario.
Thanks for sharing. Peace of mind is a huge mental advantage. Thanks for acknowledging that it doesn't necesary work for everyone. But I agree, it really depends on your situation, age, risk apetite and overall goals. If it's your primary residence, it can also make a lot of sense to just settle the debt. Thanks for watching 💪🏻😎
Thanks for sharing. You make a Great point. This is something you need to account for by building a large reserve fund for EACH property. Vacancy is part of the game, so you just need budget for it.
Louis. Your 1st statement does not make any sense, you should double check this. Most residential bonds have a "access bond" option after you have made a few instalments. Any additional instalments you make is from your own capital (there you are correct) but it does not go towards the interest, it goes against the outstanding capital of the property and when the capital amount is reduced, then the overall interest amount is reduced. Hence, making additional payments on any property is beneficial on 2 fronts: it lowers your overall interest as interest is cucullated only on the outstanding portion of the loan and it will double as a good savings account, helping you buy the next property!
Hi Niel, Thank you for your comment and for sharing your insight. You are 100% right . I, however, never mentioned that your additional payments will go directly to interest, i merely mentioned the way the amortization process works. But yes, extra payments will help reduce your interest, but for me, it did not make sense because I suddenly had less cash to invest elsewhere. Like I mentioned, there's nothing wrong with paying extra on your bond, alot of people prefer this because of the savings on interest. Thanks for commenting and pointing out an aspect that I may have missed mentioning. All the best
One thing that makes me want to pay off a bond quicker is fighting the interest hikes. In my mind, and this can be due to my lack of knowledge, putting in +20% over my installment will reduce the impacts that interest hikes will have on my installment.
Thanks for sharing. Yes, the high interest rates suck and it is scary to see how much of your money goes to interest payments. Adding around 20% month over month will greatly reduce your interest paid, and you should be able to pay off the bond quite quickly.
Just to add. If you living in a property that you have a bond on and want to purchase another porperty that you want to RENT out and your expectation is that the Tenant will cover that bond, THINK AGAIN. This can and will only work ( in my opinion) if you able to cover the bond on the 2nd property as well. In today's uncertain economic climate TENANTS often default (not all of them) so you have to make sure you are financially able to handle all the expenses that comes with owning another property > Bond, water/rates, maintanence , etc.
Thanks for your clmment and for sharing your thoughts. You make some valid and very important points. I can't agree more on the importance of having a healthy reserve fund. 💪🏻
This notion of people being fooled by bankers thinking having a property with a bond as an asset baffles me. How is it an asset when you owe the bank? The only asset one has when they have a bond, is the debt itself, not the property which still belongs to the bank.
Hey Louis, Whats your thoughts on buying plots of land or just land in general then building holiday cottages/BNBs/campsites etc.? Or land for small production farming, hosting events etc.? What would be the benefits of obtaining a few arches of land and how could one profit off it? Also, if someone has land, how could they leverage against it to buy more assets? I would really appreciate your feedback.
I like the idea of owning large amounts of land. Me and my bussiness partner farm with cattle small-scale but we are currently renting land because it works out much cheaper. Theres alot of opportunity when owning land but it really depends on what type of land it is, livestock vs sowing or Airbnb vs Events venue etc. Location is key when you try events or weddings or short term rentals. It also tends to be more capital-intensive, but theres alot of ground to cover with this topic so its difficult to answer your question in one comment. But what I can say is that if you see an opportunity in your area, you should act on it after you've done your research
Thanks for the suggestion. I'll see if I can cover this in a video, but I wouldn't fix rates when interest rates are high. You Can rather fix them when they are low.
Hi Louis, many thanks for this education. I am currently using the old school technique of paying of bond asap. My main reason is that it gives me more cashflow. Your views? Kind Regards Gauchet
Thanks for watching Gauchet, There's absolutely nothing wrong with that strategy because I am still young. I prefer using leverage, and my goal is to acquire as many properties as possible. Not necessarily paying them off. You can always make use of a access bond to have access to your additional payment if necessary. Thanks for sharing
You are allowed ! But making extra payments will come from your own pocket which in esence means you are pauing for the interest and not the tenant. You can always make use of an access bond to still have access to your additional payments 💪🏻
Would you say that an access bond is beneficial. I have been putting excess money into the bond saving on interest and reducing my monthly instalment. Would you advise rather doing something else with it or I'm possibly doing the right thing. My money is fully accessible but I have noticed that for some reason my cash available is reducing as time progresses
With high interest rates, it makes sense to park extra money in your access bond. You are effectively earning/saving 11.75% on that money. The option of your access bond means that as you pay down your bond, the less capital will be available. There is a second option, but I would stick with your approach. Hope this helps
Enjoyed the video, just one question. If your rental income covers the bond repayment per month and you have additional money from the rent left over. Would it not be beneficial to use that to pay additional per month, wouldn't this go towards decreasing the amount owed and the monthly repayment would eventually decrease which would leave you with even more money left over per month. Please do let me know if I am perhaps incorrect on the statement I have made as this was going to my be my approach
Thanks for your comment and for sharing your thoughts. You are not wrong at all. Making additional payments will reduce your interest expense and decrease your principal owed. But it means you are using money that could have been used to put down towards more property or to re invest elsewhere. It's called the opportunity cost of money. Do yourself a favor and use the extra bond payment calculator on google and see if it's worth it. Most of the time, it seems very appealing, but more income also means more taxes. The point im trying to make is that it's not wrong following that strategy. It's not one that I use, but that part of why property is so interesting because there are many ways to approach it. Hope this helps. Thanks for watching 👊🏻 😎
Bro can you explain an access bond? Bought a 1.3m 2bedroom apartment with balwin 1 year ago. Currently they selling for 1.6mil. Heard about an access bond but information on the internet is all over the place
Thanks for your comment. Did you register the property for a higher value ? A access bond gives you access to existing equity or additional payments. You use a acess bond after a refinance but for that, you need to register the property at a higher value, or you will have to pay registration costs again. Feel free to pop me an email at louisreynhardt@gmail.com 👊🏻
Whats your budget for these rentals? Ill share a link with you and you can contact the agent and ask for similar rentals I found this 2 Bedroom Apartment / Flat on Property24. Check it out: www.property24.com/to-rent/langenhovenpark/bloemfontein/free-state/9735/113529119
Thank you. Budget between 6k to 8k pm. For UFS senior lecturer / academic . Prefer safe quiet townhouse type accommodation in areas close to Universitas Hospital Complex. Assistance appreciated .
I'm not following your logic. you state "paying off the bond earlier doesn't mean you are avoiding the interest" But it IS avoiding interest payments. you literally pay less interest every month. e.g. if you dropped 100k into the homeloan, your monthly repayments go down and you are suddenly able to withdraw R1175 from the rental income every month that would have otherwise gone straight to the bank. Since the bank is currently charging 11.75%, that is way higher than investing the 100k could earn you, so putting your savings in the bond saves you more money than investing it would have earned you?
Extra payments will reduce interest, yes. Im not denying that. What I am saying is that you are using your own money to pay back the bank quicker. The only one winning is the bank. It makes sense if it's your own residence, but investment properties make more sense if you use other peoples money to pay back the bank, although it may take longer. It's also worth reading up about the time value of money and ROI using OPM
Ek sou begin met Rich Dad Poor Dad, en nog 'n boek van hom " cash flow quadrant" Think and grow rich is 'n baie goeie boek asook enige boek van Tony Robbins. Die mense kan ook gesien word as mentors. Of jy kan paid mentors kry , op youtube of ander professionals. Solank jy kan aanhou leer. Seminars en webinaars is ook 'n great manier om te leer. Jy kaan ook altyd my property course oorweeg of ander courses. 💪🏻
Jy kan kyk na Jason Lee se boeke, Jaco Grobbelaar of Laurens Boel. Dit is maar skaars op die stadium. Ek dink die inligting online sal amper meer help.💪🏻
These are some of my biggest property mistakes. I hope that you can learn from my mistakes and fast forward your investment journey 💪🏻💰
Best thing I ever did was paying off bond earlier, gave me peace of mind and helped me navigate the uncertain times. Agree not a one size fits all scenario.
Thanks for sharing. Peace of mind is a huge mental advantage. Thanks for acknowledging that it doesn't necesary work for everyone. But I agree, it really depends on your situation, age, risk apetite and overall goals. If it's your primary residence, it can also make a lot of sense to just settle the debt.
Thanks for watching 💪🏻😎
nope -- the BIGGET mistake is assuming you will have 100 percent occupancy over the time of your rental business
Thanks for sharing. You make a Great point. This is something you need to account for by building a large reserve fund for EACH property. Vacancy is part of the game, so you just need budget for it.
Louis. Your 1st statement does not make any sense, you should double check this. Most residential bonds have a "access bond" option after you have made a few instalments. Any additional instalments you make is from your own capital (there you are correct) but it does not go towards the interest, it goes against the outstanding capital of the property and when the capital amount is reduced, then the overall interest amount is reduced. Hence, making additional payments on any property is beneficial on 2 fronts: it lowers your overall interest as interest is cucullated only on the outstanding portion of the loan and it will double as a good savings account, helping you buy the next property!
Hi Niel, Thank you for your comment and for sharing your insight. You are 100% right . I, however, never mentioned that your additional payments will go directly to interest, i merely mentioned the way the amortization process works. But yes, extra payments will help reduce your interest, but for me, it did not make sense because I suddenly had less cash to invest elsewhere. Like I mentioned, there's nothing wrong with paying extra on your bond, alot of people prefer this because of the savings on interest.
Thanks for commenting and pointing out an aspect that I may have missed mentioning.
All the best
Very very informative.... And free nogal!!!
Thanks for watching my friend. Appreciate the support.
When you pay off the bond sooner you reduce the interest component and save money.
Absolutely 💪🏻
One thing that makes me want to pay off a bond quicker is fighting the interest hikes. In my mind, and this can be due to my lack of knowledge, putting in +20% over my installment will reduce the impacts that interest hikes will have on my installment.
Thanks for sharing. Yes, the high interest rates suck and it is scary to see how much of your money goes to interest payments. Adding around 20% month over month will greatly reduce your interest paid, and you should be able to pay off the bond quite quickly.
Just to add. If you living in a property that you have a bond on and want to purchase another porperty that you want to RENT out and your expectation is that the Tenant will cover that bond, THINK AGAIN. This can and will only work ( in my opinion) if you able to cover the bond on the 2nd property as well. In today's uncertain economic climate TENANTS often default (not all of them) so you have to make sure you are financially able to handle all the expenses that comes with owning another property > Bond, water/rates, maintanence , etc.
Thanks for your clmment and for sharing your thoughts. You make some valid and very important points. I can't agree more on the importance of having a healthy reserve fund. 💪🏻
This notion of people being fooled by bankers thinking having a property with a bond as an asset baffles me. How is it an asset when you owe the bank? The only asset one has when they have a bond, is the debt itself, not the property which still belongs to the bank.
No, you simply control the cash flow the asset produces until it's paid off.
@@louisreynhardt understood
Hey Louis, Whats your thoughts on buying plots of land or just land in general then building holiday cottages/BNBs/campsites etc.? Or land for small production farming, hosting events etc.? What would be the benefits of obtaining a few arches of land and how could one profit off it? Also, if someone has land, how could they leverage against it to buy more assets? I would really appreciate your feedback.
I like the idea of owning large amounts of land.
Me and my bussiness partner farm with cattle small-scale but we are currently renting land because it works out much cheaper.
Theres alot of opportunity when owning land but it really depends on what type of land it is, livestock vs sowing or Airbnb vs Events venue etc.
Location is key when you try events or weddings or short term rentals.
It also tends to be more capital-intensive, but theres alot of ground to cover with this topic so its difficult to answer your question in one comment. But what I can say is that if you see an opportunity in your area, you should act on it after you've done your research
can you talk about how one can get fixed interest rates because everything now a days isn't fixed
Thanks for the suggestion. I'll see if I can cover this in a video, but I wouldn't fix rates when interest rates are high. You Can rather fix them when they are low.
Hi Louis, many thanks for this education.
I am currently using the old school technique of paying of bond asap. My main reason is that it gives me more cashflow.
Your views?
Kind Regards
Gauchet
Thanks for watching Gauchet,
There's absolutely nothing wrong with that strategy because I am still young. I prefer using leverage, and my goal is to acquire as many properties as possible. Not necessarily paying them off.
You can always make use of a access bond to have access to your additional payment if necessary.
Thanks for sharing
Are you not allowed to capitalise any additional payments like with vehicle finance?
You are allowed ! But making extra payments will come from your own pocket which in esence means you are pauing for the interest and not the tenant. You can always make use of an access bond to still have access to your additional payments 💪🏻
Of your property is at a shortfall. U have to cover it
Yes, that's correct 💪🏻
Would you say that an access bond is beneficial. I have been putting excess money into the bond saving on interest and reducing my monthly instalment. Would you advise rather doing something else with it or I'm possibly doing the right thing. My money is fully accessible but I have noticed that for some reason my cash available is reducing as time progresses
With high interest rates, it makes sense to park extra money in your access bond. You are effectively earning/saving 11.75% on that money. The option of your access bond means that as you pay down your bond, the less capital will be available. There is a second option, but I would stick with your approach. Hope this helps
Enjoyed the video, just one question. If your rental income covers the bond repayment per month and you have additional money from the rent left over. Would it not be beneficial to use that to pay additional per month, wouldn't this go towards decreasing the amount owed and the monthly repayment would eventually decrease which would leave you with even more money left over per month. Please do let me know if I am perhaps incorrect on the statement I have made as this was going to my be my approach
Thanks for your comment and for sharing your thoughts.
You are not wrong at all. Making additional payments will reduce your interest expense and decrease your principal owed. But it means you are using money that could have been used to put down towards more property or to re invest elsewhere.
It's called the opportunity cost of money. Do yourself a favor and use the extra bond payment calculator on google and see if it's worth it. Most of the time, it seems very appealing, but more income also means more taxes. The point im trying to make is that it's not wrong following that strategy. It's not one that I use, but that part of why property is so interesting because there are many ways to approach it.
Hope this helps.
Thanks for watching 👊🏻 😎
Thank you so much, this was very helpful!
Bro can you explain an access bond? Bought a 1.3m 2bedroom apartment with balwin 1 year ago. Currently they selling for 1.6mil. Heard about an access bond but information on the internet is all over the place
Thanks for your comment. Did you register the property for a higher value ? A access bond gives you access to existing equity or additional payments.
You use a acess bond after a refinance but for that, you need to register the property at a higher value, or you will have to pay registration costs again.
Feel free to pop me an email at louisreynhardt@gmail.com 👊🏻
Thank you for video. Looking for a 2 bedroom townhouse in Universitas Ridge or Langenhoven Park to rent . Please let me know who to contact. Thanks
Whats your budget for these rentals? Ill share a link with you and you can contact the agent and ask for similar rentals
I found this 2 Bedroom Apartment / Flat on Property24. Check it out: www.property24.com/to-rent/langenhovenpark/bloemfontein/free-state/9735/113529119
Thank you. Budget between 6k to 8k pm. For UFS senior lecturer / academic . Prefer safe quiet townhouse type accommodation in areas close to Universitas Hospital Complex. Assistance appreciated .
I'm not following your logic. you state "paying off the bond earlier doesn't mean you are avoiding the interest"
But it IS avoiding interest payments. you literally pay less interest every month.
e.g. if you dropped 100k into the homeloan, your monthly repayments go down and you are suddenly able to withdraw R1175 from the rental income every month that would have otherwise gone straight to the bank.
Since the bank is currently charging 11.75%, that is way higher than investing the 100k could earn you, so putting your savings in the bond saves you more money than investing it would have earned you?
Extra payments will reduce interest, yes. Im not denying that. What I am saying is that you are using your own money to pay back the bank quicker. The only one winning is the bank. It makes sense if it's your own residence, but investment properties make more sense if you use other peoples money to pay back the bank, although it may take longer. It's also worth reading up about the time value of money and ROI using OPM
Great video.
Thanks Franco 💪🏻
Great content 👌
Thanks for the feedback 💪🏻💪🏻
Hi Louis! Wat is boeke wat jy sal aanbeveel en wat sal jy doen om n mentor te kry?
Ek sou begin met Rich Dad Poor Dad, en nog 'n boek van hom " cash flow quadrant"
Think and grow rich is 'n baie goeie boek asook enige boek van Tony Robbins.
Die mense kan ook gesien word as mentors. Of jy kan paid mentors kry , op youtube of ander professionals. Solank jy kan aanhou leer. Seminars en webinaars is ook 'n great manier om te leer. Jy kaan ook altyd my property course oorweeg of ander courses. 💪🏻
@@louisreynhardt dankie man! Is daar enige boeke spesifiek vir Suid Afrika se mark wat jy van weet?
Jy kan kyk na Jason Lee se boeke, Jaco Grobbelaar of Laurens Boel. Dit is maar skaars op die stadium. Ek dink die inligting online sal amper meer help.💪🏻
@@louisreynhardt awesome dankie! Sal bietjie kyk. Love die videos!
😂😂😂Emotional nice properties to have
🤣🤣 Believe me, people buy property based on emotions 🤣