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Saving for house

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BC02
Super Contributor
the biggest problem I have with property though (assuming I've just had bad luck with capital growth). Is that there are too many fingers in the pie, Tenants mess up the place, Municipalities bugger up the accounts, Managing agents steal, Body corporates mismanage, Agents take huge commissions for doing nothing...

Its just never been worth the effort for me at least.
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superstar
Regular Contributor
Taking into account the laws of economics, If cost of borrowing increases (interest) the capital amount should decrease. I am expecting a futher challenge with property industry so you have to look carefully on buying now or later.
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THRESHOLD
Super Contributor
Leaving aside the financial implications for the moment; you will need to be confident that you will continue to hold a job (if you cannot meet your mortgage it is over;) that the job will always be in (or close to ) the area in which you buy your "home", that you will not need a bigger home (family/work from home.) You may change cities, even countries in the years to come. Buying and selling properties is absurdly expensive. You will need to pay 6ish months deposit on your municipal accounts when you buy. You will need to pay 6ish months deposit on your municipal accounts when you sell (and you never get this back.) Your wife/wife-to-be may hate the property. You may become incapacitated and default on your bond.... expensive life assurance is necessary to negate this risk and to satisfy the bank. Down-scaling if you lose your job (change of circumstances) is uber-difficult..
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THRESHOLD
Super Contributor
Leaving aside the financial implications for the moment; you will need to be confident that you will continue to hold a job (if you cannot meet your mortgage it is over;) that the job will always be in (or close to ) the area in which you buy your "home", that you will not need a bigger home (family/work from home.) You may change cities, even countries in the years to come. Buying and selling properties is absurdly expensive. You will need to pay 6ish months deposit on your municipal accounts when you buy. You will need to pay 6ish months deposit on your municipal accounts when you sell (and you never get this back.) Your wife/wife-to-be may hate the property. You may become incapacitated and default on your bond.... expensive life assurance is necessary to negate this risk and to satisfy the bank. Down-scaling if you lose your job (change of circumstances) is uber-difficult..
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THRESHOLD
Super Contributor
Location, Location, Location. - AND first time buyers can't afford it. So they don't buy an asset - they buy a liability; and keep the banks in business (and the municipalities and the conveyancers and the estate agents and the insurance companies and the...) Come on DEP - this is the ultimate conspiracy - and even I would agree with you on this one.
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prancing_horse
Super Contributor
Owning your own house gives MOST people a sense of security and acheivement, but for me it's an evil necessity. The only advantage of buying a home is that it forces the undisciplined to save. The maintenance of a home is never ending, your kitchen, bathroom, roof etc like us have a life span.
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DEP
Super Contributor
Hahaha, I had to call my wife to read this... just in case I'm reading it wrong! WOW! I retired at 42 because of property -- so don't give me this garbage!
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BC02
Super Contributor
totally agree with this, (it helps the undisciplined save), as well as the never-ending costs, (repairs, levies, prop tax, agent comm, water & elec, conveyancer fees...). The list seems to go on and on.
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THRESHOLD
Super Contributor
For a change - I can only agree. New buyers don't realise that they may not have the capital to even maintain the house given the unforseens. If they rented - they would eliminate all of this. AND then there are those bills for R100000 of water in one month - oops! Let it be someone else's problem
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Rams
Super Contributor
as long as its not one of those Lehman/bear sterns type bank....under the matress safest place? eh eh
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DEP
Super Contributor
Threshold, since you so well informed - if property is a bad investment, tell us what's a good investment.
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prancing_horse
Super Contributor
I think a few of us on this forum have made a lot of money investing in property.Having been in construction from an early age and having built numerous houses on property I'd bought for the sole reason to keep my staff busy during the lean times, investing in houses gave by far the worst returns and the greatest headaches. Commercial have been my best followed by industrial, as far as my investments in property. I stick by my statement that "a house is an evil necessity".
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THRESHOLD
Super Contributor
Education. Lesson1: Don't ask stupid questions. You are effectively saying:Because you can see a yawning chasm - you must know how to build a skys*****er. Go - buy as house.
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DEP
Super Contributor
Thanks, i might be buying one this week - got an auction Thursday.
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THRESHOLD
Super Contributor
Every idiot made money buying property. In 1998 I was achieving 25% rental yields on some of the reidential stuff Now it's getting 5%. I "retired" when I was 36. Worst move of my life. Boredom - endless need to get involved in something. Chat nonsense with the likes of you.
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DEP
Super Contributor
NOMAD1, after reading the discuss here... would you still buy that house you were planning to?
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THRESHOLD
Super Contributor
That rant was directed at DEP, not at you Prancing Horse. I have had extensive investmetns in property. The speculative stuff made me very good money. The rest was a waste of time. These guys need to look at the LONG term returns on property vs alternatives. When it comes to property - people invest with their hearts not their heads.
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BC02
Super Contributor
I think what Threshold and the other guys are trying to get across is not that you cant make money from property, you can - as some of them have (especially over the past 10 years). You can make money from property, shares, art, collectibles, etc.

The point they are trying to make is that property as an investment is full of pitfalls and headaches (and costs) as opposed to some other investments. Most people dont realize this as we all generally get taught "property is a great investment".

My experience has taught me to own the house I live in, other than that seek better returns from other investments.
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DEP
Super Contributor
Sure, agree property investment is not for everyone. But at least own you the house you live in... Good Point!
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Vince888
Regular Contributor
Hi, In my opinion. If you buy a house cash, it will be a good investment. However taking out a bond is not an investment but a liability. For Example: If you bought a house for R 1 000 000 @ an interest rate of 8.5% and put a 10% deposit of R100 000. If you had to pay the house off in 10 years. The total amount payable to the bank (including all interest) would be R 2 099382.40. Thereby the interest would be R2 099 382.40 less R 900 000 = R 1 199 382.40. Therefore, you must sell your house more than R2 099 382.40 to realize real profit on your house after 10 years. Bear in mind that this calculation does not include any transfer costs ect. and this is ceteris paribus, providing you have not made extra payments and the housing market remains as is, interest rates remain constant for the duration ect.
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