Equities or property?

[PaulC]

Regarding housing. The house you live in is a liability. Any others *can* be an asset. However the trick is to get a property that is +vely geared (That is the income from the house is greater than the expenses) Lets do a little experiment. For this ill use the area I live in (Hillcrest Durban) An average 3 bed house (family house) I would say is about R1.3M Assuming you are just starting out Im going to assume you dont have lots of capital lying around. Ill assume 50k savings. So you need to get a bond for 1.25M then there will be legalfees transfer duty. Using a bond calculator at current interestrates the repayments come in at R13600 pm. I know plenty people who clear that each month but lets put it in perspective a more real picture per month is as follows R13600 - Bond R1000 - Lights and water R500 - Rates R250 - insurance (ACts of god so to speak fire lightning that stuff) ------ R15350 pm Depending on how close it is to schools roads etc you will be able to rent this out for 6-8k Even if you get your 8k you still short R7350 that you have to put in EACH MONTH so the house is costing you to own. Thats NOT an asset. Then come the arguments that house prices always go up. Well the past couple years shows otherwise and go ask the japanese about the 90's where land prices dropped for 10 years! At the moment there are better places to put your money than property and with less risk. My 2c - P

[#2]

to quote my old friend Tony Soprano - buy property - because God aint makin any more of it

[Shaun_Siddall]

You will have transfer fees of +-R40k as well so your R50k will not be enough. 100% finance will be tough as well. So the cash you need will be more like a 20% deposit plus bond and transfer costs.

[Mr_S]

so then how does one get into property rental? start small?...cos there must be a way, i mean people are making money from it!

[DEP]

Sorry Paul, if you starting off, you should be looking at entry level property and not at R1-m plus.

[richardw]

Yet we bunch up in cities. There's land out there, tons of land, but we're holed up so we're close enough to jobs, schools, crouching in complexes because of the crime. Land on one side of the highway is worth a bunch, on the other side it's close to a township so drops off. There's a right place to live and a wrong place, and that can change underneath you for good or bad.

[DEP]

My favorite type of investment is Commercial Prop. And listed property is a good way to go, however the banks are not prepared to borrow money for this shares. So you can't gear these shares?

[Shaun_Siddall]

If it is an ivnestment property a bigger deposit is required. Remember rather buy 4 units at R250k than 1 at R1m. 1) No transfer costs under R500k. 2) Rate rebates on each of the props eg first 100k rebated therefore R400k vs R100k. 3) Derisk rental flow from four people vs 1 person. 4) Rental yields higher eg om R250k unit R2k rent x 4 = R8k R1m house R6k rent!.

[PaulC]

DEP you make a good point. The problem is starting at the lower end (which is a better idea) you still have to find a prop where the bond will be covered by rentals. Yes rents scale better relative to bond costs but you are still in a cash flow negative position. Bottom line residential property has run its bull leg for the next couple years. I cant comment on commercial property cause I never actually was involved. I think for the moment we should all just stick our money into "things" stuff people need. Agriculture commods base meatals energy and water. Not sexy but we not going to stop using them. Okay ill shut up now

[john_1]

The basic diffrence is the trading cost, with equity its 1% in and 1%out, with property its closer to 10% on each end... the second diffrence is that listed companies don't require any paint or maintance....both are great if you buy quality, if you buy cheap ***** both will cost you money....the biggest advantage of property is that you are much less likly to worry about its value on a daily basis. So emotionally it is easier to hold it long term.

[#11]

you can gear them infinitely better than what banks are offering on property these days - take out an SSF. Don't know if any of the listed property stocks have installments, but that is another gearing mechanism - for a longer term. Otherwise just tap into your access bond - it amounts to the same thing

[john_1]

My advise is buy the property and start buying wine..you get to throw awat the reciepts after 5 years and you will double your money every 5 years at least. its the best asset to buy with a small amount of cash... oh And chicks dig it also.

[Mr_S]

another thing shaun, is that where do you find properties for those price ranges! the only ones i can think of in my area (johannesburg north - fourways) is one complex that is swarming with drugs and controversy. you can get units for under 400k there but the general upkeep and reputation of the place is bad! if you wanted to sell, you would have a hard time!

[Running_bull]

dont buy prop just yet. stay liquid and take on some more risk through markets. yes you may lose a bit, but you will also learn lessons that can grow. im a few years older than you, but it has worked out well. anyway, personal experience. dont by wine, at this age, you'll just drink it.

[Running_bull]

dont buy prop just yet. stay liquid and take on some more risk through markets. yes you may lose a bit, but you will also learn lessons that can grow. im a few years older than you, but it has worked out well. anyway, personal experience. dont by wine, at this age, you'll just drink it.

[doomsdayza]

Student "towns" / suburbs might be a good place to start... Potch, Hatfield Pta (which is soon to be a Gautrain station). Always tennants because demand is high.

[Shaun_Siddall]

CBD redevelopments etc.

[bangbul]

Interest cost a lot of money +-100% in ten years! But if you are better off after you compare rental income against installments and the rent you pay now, go for it.