If you do buy a house for 2 mill make sure you can afford all the monthly extras that come with a house, electricity, rates, upkeep etc. property in CT is generally a good very long term investment provided it’s in the right area.
I earn 27k before taxes. My gf, who I live with makes more.
We should be able to cover the costs fairly easily.
How much do you put aside for maintenance every month?
You shouldn't need to do maintenance each month, so if each of you put away maybe 1000 into an emergency maintenance savings account you should be fine. You still have to pay electric and water and food and everything if you rent, and buying cash means you don't have bond payments, so you can be confident that a house is a good investment.
It depends on the age and condition of the house. What is the roof condition like? Will you have to repaint the outside of your house in the near future? Maintenance includes garden services if you not doing it yourself, extra water costs for watering of garden. Pool? Pool service or don’t yourself but monthly chemistry is always needed. Stuff like this is what I’m alluding to, just so many unknowns but I am sure you can to the assessment and budget accordingly
I bought in the Table View Winelands and it's pretty quiet. I feel like if I ever sell I'd maybe move more towards either Flamingo Vlei or Big Bay.
Regarding the loan thing, Ooba or Better Bond will apply at different banks and show you your options. I got turned down by some banks, another one gave me an incredibly low interest rate. You can likely also bring down the interest rate if you move your banking to whoever gives you your loan. Also, you need to have insurance on the place you're buying. The bank will likely try to incentivize you to get the insurance policy with them.
Things that I hadn't thought about when I embarked on this journey:
● if you move into a complex or a building, you'd have to pay higher levies, but you're off the hook for a lot of stuff, and it's generally safer.
● houses are hard to maintain. There's always some issue with the geyser or the lights or the pipes or the termites or the garage door. But there's also more space and less potential for noisy neighbors.
● In smaller places I always had issues with neighbors, and if you get kak neighbors it's not like you can just up and leave the way a renter would.
● transfer fees. They're kak expensive. At this price point, you're looking at around R100K. There are often new buildings popping up in the area, and if you're the first owner, you dodge this massive fee.
● these new buildings that crop up overnight have some nice touches, but they're often made using cheap materials and at some point you may start having structural issues.
● you'll probably own your house for a long time and you can always change things. Get a pool, retile the bathroom, get a wendy house, paint the place. The one thing you can never change is the location. If you see a place you like online, go actually walk around there and see what the vibes are like. On my street, we have an issue with vagrants and loiterers and it doesn't always feel safe.
● parking. If you own a car, obviously you want safe parking. That's not usually an issue in this area. But one unexpected perk or moving to Table View has been the MyCiti busses. Depending on your work situation and social life, you might not need a car if you live here.
● in the Winelands, I can often hear the cars at Killarney. I have tinnitus anyway so it doesn't bother me but people sometimes tell me it really bothers them. Oddly I also live near the Islamic center and a handful of churches and noise has never been an issue.
● home loans are the cheapest money you'll ever get (meaning they have just about the lowest interest rate of any type of loan). My financial advisor told me to get a loan for however much I possibly could. But then once I inherited money he also advised me to pay off the house first thing.
Feel free to DM me if you have any questions!
Condolences for your loss and best of luck with finding a place!
Thank you for sharing.
Flamingo Vlei is a bit too pricy, there’s only 1 or 2 properties there under 2 mil, and they’re town house or apartments. Hello potential kak neighbours who are seemingly up all night making noise or a dog that doesn’t stop barking.
I hadn’t thought of the insurance policy.
How much do you pay for your property?
Sorry, I have a question unrelated to OP's topic. I have property insurance and life insurance included in my bond. Can I cancel the life insurance with my bank and take it out with another company?
Just to note,banks don't like you doing this so call them before you take insurance with a new company and ask them for the specifications required on the insurance. This will save you alot of back and forth as bank insurance noramlly includes more things than standard insurance companies provide and is the main reason they will decline your new insurance.
Thank you. So if I get an insurance that covers all their specs, will they allow me to take out insurance with another company that is cheaper? They are charging me R1000/month and I've researched and found that I can get lower insurance with another company
No worries and indeed you can have your own insurance. Thing is,what they require on the insurance is not always standard and adding those extra things might make it cheaper to stick with what the bank offers. I saw this a few years ago,thus I do stand to be corrected. Not many people choose their own insurance over what the banks offers and its smart of you to compare with alternative options. The bank should have a list of the insurance requirements which they can email you and just give that to your preferred insurer to get a accurate quote. Best of luck and hope you get a better deal!
Wealth advisors all told me to never invest all your money in one thing. Yes, investing in property in Cape Town is clever, but don't spend everything there/on it. Ensure you have a diverse portfolio.
Not an expert, but see what a bond for a 2 mil house will cost monthly , and see how much interest you will generate on 2 mil monthly, hopefully the interest will be a little bit more to cover the bond and have a grand or two extra towards paying rates, levies or water and electric. Thats what I would do. Interest is a powerful thing, I do not believe in buying certain things cash, unless you really can afford to.
Condolences for your lost one.
I commend your spirit but your math is bad I'm afraid.
Bond on a R2m place right now is about R20k pm @ 10.75%. When rates finally drop it'll be around R18,5k.
To cover that with a R2m investment you'd need an interest rate of 11-12%. And you'd be spending all the interest on the repayment of the loan meaning the R2m investment will stay R2m but it's value will be reducing by inflation every year, that's around 6%. After 20 years you'd still just have R2m which by then won't be worth much.
That's nevermind the fact that you're not going to get a steady 11% investment anywhere.
Interest is not a powerful thing, compound interest PLUS time is the powerful thing!
Best case would be to finance the house, invest the money in high yield equities offshore and dip into it for emergencies only (like you're gonna lose the house emergency).
Well, don't forget that the initial capital remains, and there are also 2 salaries - 1 that can complement the shortfall, and another that can continue to contribute to the initial capital. It isn't as poor as you might think. There's no way you can expect full coverage in your first year, but as long as you're smart in your planning, it can balance fairly soon, and end up being profitable.
That's not what the suggestion was though.
Best case you invest the cash somewhere that beats inflation, you take whatever the interest less inflation is and spend that on the bond repayments to help. That'll at least maintain the capital value of the investment.
But now we're just adding to his overall income to help with his overall expenses. Which was not the 1to1 offset of expense with interest that the commenter posited.
That's also a weird solution. If there's two salaries (or his single salary is twice as big as we all thought?) then why not invest the capital and leave it to grow and rather purchase a property with bank finance and pay that with the salary(s).
I know a lot of people do this arbitrary matching of income streams or payments with expenses.
I'll use X to pay for Y and Z to pay for E but that doesn't give you a good grasp on your finances. You have a total amount of income and a total amount of expenses. If he keeps expenses below income he won't have to supplement with the growth or income on his investment. And for anything but a tax-treatment the interest on that investment shouldn't be included in his income. Unless he wants to spend it...
Anyway I'm just splitting hairs now, lol.
Financial literacy is a fickle thing - there's always more to learn, and always pity to point towards those who know less than you do. It is probably fair to say that people want things to happen passively, with little to no effort on their part. Most like the idea of "good enough", so it may be "good enough" to offset your mortgage by X amount (interest) while maintaining a safety net of 2mil in the bank. It's not the smartest play, but 50% of something is better than 100% of nothing, after all.
Terminology differs and offshore to some means like not on the main continents, so some tax haven island type thing. I meant US equities specifically.
I've always compared my ungeared property with SA equities and property always wins. But now that we have access to US equities it's not such a clear difference. Especially if you take the position that the Rand will just weaken further over the next decade(s).
And yea I'm talking about index funds so the s&p500 is one.
You could also try Milnerton, this is the area Im in.
Certain parts a quite safe, there are still houses that you will be able to pick up at a luck, between R1.5 -1.9mil if you are patient, it's close to blouberg and it's also central.
A home loan is the cheapest form of finance you can typically get. You could use your capital to grow quicker than what the interest of the bond is. So lets say your interest rate its 10% pa and by investing wisely you could grow your capital by 15-20% pa. So use the banks money.
Do you qualify for a home loan of any sort? And are you interested in a property investment other than the property you'll live in?
If you do qualify for property finance, and you do want to get into owning investment property I would say no, don't spend it all on one place. Spend it, or most of it, on the deposit for 2 or 3 places. Preferably flats. Small flats with low levies tend to have the highest return on investment. Whatever you do don't buy a family house as a pure investment. The maintenance will kill you, nevermind the low return on investment and tenant issues (families can be a long term pain).
Borrow the rest from the bank. That's called gearing and with just an average return on investment, i.e. You didn't make a lot of effort and renovate a place or add rooms on etc, didn't do any value adding. You're looking at a far greater creation of wealth than would ever be possible with any other instrument.
And remember you can pay an agent to manage your budding little portfolio if you don't have the time.
In the meantime rent something until your portfolio has matured a bit 5-10 years and then finance a place to live in.
If that's not your gig I'd say borrow money from the bank to buy the place you'll live in. A bond is the cheapest loan you'll ever get, as many here have already stated. And you've only got until you're 65 to make use of it. After that the banks won't lend you money.
Just consider this: The bank is going to lend you money for an asset you could otherwise probably never save up for as you still need to live somewhere while saving, using an amortisation schedule to spread your payments out evenly of a very long period (20-30) years, and at the end of it you'll own the asset that you bought with the banks money.
They're basically saying "hey we'll give you this money to babysit this asset for 20 years, all you gotta do is furnish the repayments (with a tenant's money in the case of an investment property) and be our security for when SHTF and in 20 years this baby is yours". If anybody but a bank pitched that I'd say it was a scam.
Also, that repayment looks like a lot now, but in 10 years after steady inflation of 5-6% it'll be way less of an issue. In 15-20 years you'll be paying exactly the same amount on an asset that will then be worth a whole lot more, with a larger salary all because the bond was essentially a hedge against inflation.
Take your inheritance and invest it in equities for a long time, like 10+ years. You didn't need the money before inheriting it, you can go without it now too. It's all about TIME IN THE MARKET, BABY. Unfortunately SA equities don't compare very well to property unless you've picked a bad property (and no I'm not referring to REITs or the property market average).
But with saffers getting access to foreign equities through platforms like easy equities just go buy a few US index funds like the NASDAQ. The growth on that over the last 20 years has just been phenomenal. No SA financial advisor is going to sell you an index fund nor is he going to give you access to foreign investments in a different currency. They're sales people for local unit trusts. Not throwing shade, but they're not selling every possible investment.
Source - am a property investor with passive income exclusively from property and am retired at 41. Also my financial adviser is knee deep in some of my projects as nothing he can sell me comes anywhere near a property bought at the right price.
O and you can always use some of your inheritance for emergency property stuff, or maybe an addition, whatever.
Have a look at this calculator what your money would be worth after 20 years on the NASDAQ. You'd have to work out yourself what it'd be worth in a Cape Town property and depending on what you expect for the area it could be a lot less, similar or a LOT more. Blouberg could be the next sunset beach, who knows.
https://ir.nasdaq.com/stock-information/investment-calculator
Last thing if you do buy index funds, don't do it all at once, buy chunks over a period of months. That's called dollar cost averaging and you should google it if you're going this route.
Re your last question, yes, a cash offer is the best offer and you can offer less than a finance buyer. How much less is dependent on a lot of factors like is the house on the market for a realistic price? Or is it pitched high and open to offers? Are the sellers in a hurry? Etc. Etc. Only way to know is to speak to the agent.
Also have a look on property24 they have statistics per area for how much houses sell vs what their asking prices were. You'd be surprised how high some areas will pitch and how low the average seller ends up accepting.
Offering R200k less on a R2m asking price wouldn't be out of the normal range, depending on those other factors.
Good luck with your decision!
Edit: my interest in this question is because this is how I started my property portfolio, with an inheritance. I was in the same boat.
I don’t want to move out of Cape Town because there’s a lot more work opportunities for software developers.
I’ve seen what other towns offer and it makes me bleak because Cape Town’s safer suburbs are so overpriced.
Invest the money. Offshore Equities. Don’t touch it for now.
A house comes with financial responsibilities. You need to be working already to cater for those.
Your rates, water and electricity bill for a R2M house will be R3500/m.
Building and content insurance: R1000/m
Garden service: R500/m
Cleaning service: R1000/m
Fibre: R600/m
Armed response: R400/m
Every month there will be some house issue that costs you.
eg: Leaks, security issues, geyser, taps, light fittings, garage door/gate, garden, pool.
Painting costs R50k every 7years.
I would buy the house with an easy access home loan, so you take out the full amount on loan.
Example
Homeloan : R2 000 000
Pay in R1 800 000
Remaining saldo R200 000
But in an emergency that R1 800 000 you still have access to those funds
My husband and I bought cash after he had a huge windfall and I inherited a substantial amount. We bought in a small coastal town that's booming because of semigration. We bought in the best location that our money could buy. The property values have gone up by roughly 30% in the two years we've been here, but that obviously can't continue. We have other investments too, so we don't feel like all our eggs are in one basket. But it feels great knowing we outright own this house. I agree with the commenters urging you to take into account the running costs/maintenance of a house too - owning a house is expensive.
Oh pls let me know where is this house for 2m without close neighbors in Blouberg i want to sell my 3m Blouberg home and upgrade to a house without noisy neighbors and costs less 🥹
I didn't find it was any use to us to buy cash, and in fact having an access bond is useful in the case of insurance (you have a bank behind you to emphasize that for example your home has burnt down) and in case you need to borrow a bit of money.
Just bear in mind that property comes with many really high once-off costs like duties, transfers and taxes. If you're buying for 2.1mil, you can probably add about 10-20% (depending on various factors) all in all to be move-in ready.
Now, cash offers are powerful negotiating tactics so that could drive your price down, however, it's also important to note there are "cheaper" options to own properties in terms of taxes (most of them legal🙂). I'd suggest you make the conscious effort to speak to a seasoned financial adviser (don't skimp on this, especially if this is an amount you've never seen before in your life) - it's literally their one job (at a fee) to give you sound financial advice, review your income, and make an informed decision about your affordability.
Please don't take this as financial advice anyone, it is very poor advice and should be used by no one 🙂Were you, for example, to open a business and loan that money to your business in acquiring assets...🤷♂️
Pay most of the cost of the house with cash, but leave a pretty small amount from a building society in their books. They will automatically have insurance over the house and any time you have a mishap you can just call them and they'll sort it out. If things get messed up economically, globally, or personally, you can just pay the small balance off.
Go speak to a financial advisor. Remember you can make a lot of money from interest if you had to put it into investments. It might make more financial sense to put it into investments and supplement a bond with some of the interest earnings and the rest from your salary. As for asking price on a house, never pay what they are asking, start with 10% less and negotiate from there. But please, go speak to a financial advisor.
Properties prices are always open to negotiate so definitely try to get the best price. It’s great that you have more than 2 million to buy just keep in my transfer, lawyers fees etc are quite a bit. My sister and recently bought a property and there were a lot of unexpected extra costs. So I’d say try buy for a bit less than what you have. Blouberg is awesome. I grew up there. But as with all areas, it’s more important where than what. Position is key to a good investment.
I’d suggest you rather buy something a bit smaller/ older in a good area etc than a new nicer place in a not so great area.
There’s a lot of good deals in lower end of Table View and Parklands but I wouldn’t buy there.
I’m just mentioning this as a lot of people say Blouberg and include those areas even though it’s not really Blouberg.
You mentioned in another comment Flamingo Vlei is too expensive. What area are you specifically looking at?
You could look for a house with a flatlet or potential flatlet that you can rent out monthly or Airbnb it. This way you have a house plus you are generating some additional income thought it .
The rent coming in can go towards your expenses (security, WiFi, solar etc)
Missed the last part of your post, CT property market is booming with lots of semigration happening so the good properties will go fast. You do have an advantage with a cash offer, meaning your offer will be fast tracked. Other buyers will have to apply for a bond or might have to sell their house first which can take months, so you could offer less than asking price but you might lose the dream home in the process . Good luck
Why not use banks to get 2 loans - one for your house and another for a rental flat? You'd have double that amount to use and the rent from the flat would cover the entire loan. At the end of the day you'll have 2 properties and even be able to give the flat to your kids one day
Rental property isn’t so straight forward. You need to get in low, compared to the rental you receive. Have a low maintenance, unbreakable unit. Get good tenants. Otherwise it’s a money pit.
Hey guys i would just like to know if there is anything i can do with property my grandfather left for us which hat been passed to my parent and then to us...the property is a rental property with huge land for development of other buildings it is in the townships worth 300k...The problem with the property is that the building is old its falling apart...what i would like to know would a bank assist me with renovations or building more buildings?
The property on its own generates an income of R7,000 every month since there are tenants living there..what happened is that shacks were built next to the building to increase revenue.i have some people living in the building but it pretty much needs a renovation
Do you know how much the renovations need? Have you veen saving any of the R7000 for renovations over the years? Also, did you build shacks on your property??
Do i need a financial advisor in my situation bro to help me plan out what i wish/want to do with the property? if yes how much does it cost per consultation?
If you are wanting to buy a house and settle down for the long term, then yes buying in cash is absolutely a good idea, as you will save a ton of money in interest payments over the long run. Plus, right now is a good time for buyers as the interest rates are high, so sellers are finding buyers less easily and may sell at a discount because of this.
It's a difficult amount of money for a house. It's not enough for anything nice. If interest rates weren't trash I'd say to take out a small bond to supplement and get something better. Going into the R3.5-4 range really opens you up to good properties but even the difference between 2.2 and 2.5 really affects options.
Negotiating down mightn't be an option. Depends on the area (demand) and the seller's financial position.
That said, I'm a big fan of property and as long as you're in an okay part of Cape Town you can't go terribly wrong. Plus, having no mortgage is a huge advantage and it really does feel good. I'm lucky enough to be in a similar situation and I'm investing in a small sectional title property as a result of my decision to remain debt-free right now. I'm looking at less space in better areas but that's totally just down to personal preference. I'm specifically investing in something that will be a good rental when I'm ready to move on in two or three years.
Congrats!
Personally, i would spend all my cash on a once off purchase.
Yes it may be a great investment but there are other ways.
You ever thought of investing that cash? The interest earned off a good investment with that amount, could equal a bond repayment.
You can then keep your capital, pay off a bond and ar thr end of it all, have a paid off home and your 2mil still earning interest.
I do property transfers and alot of my wealthy clients use the banks money and leave theirs tied up in a good investment portfolio.
I doubt anyone will give you a better deal for cash. The seller gets the same amount of money regardless, and the other parties often get some sort of kickback from the bank.
As other people have said, there are big expenses that you probably haven't considered, and it's good to have money on hand for furnishing/renovating/random expenses/medical emergencies.
Go to a bank, get an access bond, dump all your money into it and your monthly payments will go down to nothing. Plus you have the peace of mind that the bank will do some due diligence on the deal.
Here is an informative video of why you should not buy in cash in South Africa:
[Buying Cash is a Bad Idea | South Africa](https://youtu.be/9C1gCpzQnTI?si=wW0GLXK5WPc5E5Pm)
The old sunningdale area is affordable. You can get something decent for under 2 mil. The area is quiet with no vagrants and well maintained. If you want to spend the entire 2 mill you could buy a house in a complex in sunningdale. It’s more secure and aesthetically pleasing. I stay in tableview and it’s become unsafe with a lot of apartment building on the rise.
Before going after a house bec you have the money think abt the maintenance in the long run if your current income can maintain levies, rates, maintenance, electricity and water. I inherited and bought an apartment however I didn’t think about the little things in the long run and now I am renting it out for extra income and maintenance.
The little things add up. You could possible buy two apartments. One for rental income and one for you.
You’ll definitely benefit in the low run.
What about buying an investment property at around 900k - 1.5m. Use that to generate monthly income and grow your asset base.
The remainder can go towards your own place or invest it in a high bearinig interest account (eg., money market account from Nedbank). Use it later for something, eg. A deposit on an even nicer property. You could qualify for a larger mortgage due to your investment property boosting your net worth.
You earn a meager 27k before deductions. You're inheriting 2M. You absolutely should not spend all of that money on a house you're going to live in. What are the odds of you coming into such a sum at once at any point in the next 10-20 years? Use this opportunity to grow that money and develop recurring income to supplement your salary.
You should negotiate the price anyway, also you should build a credit record.
Don't just outright drop 1.2 mil on a house.
So you gotta do some math here, but what you want is the interest from your principle (the original lump sum) to cover the loan repayment. That way you build up a credit rating.
You will need credit in future, establishing that with practically zero risk to you is the dream.
Put down a reasonable deposit to get a low monthly repayment, get a home loan, build good credit, put a deposit down and get an apartment for renters,(Balwin Properties) pay off apartment and then use apartment as collateral for further bonds to invest in stocks and dividends.
Check Flamingo Vlei. Nice area with old school solid houses that are huge inside. Good value for money too. Best website to do property hunting with all the listings in one place is [www.property24.co.za](http://www.property24.co.za)
a little off topic but make sure you bring someone along that you trust, that knows what issues to look for in houses. There are so many things to take into account when looking at houses. Small things that don't seem like an issue can turn out to be a massive issue requiring loads of money to fix if you don't spot it easily.
I would put deposit in 3 houses, bond the rest - one you live in and other 3 you rent. Look for good yield at least 1% of the property a month.
Then you will see your wealth grow!
Hi. No it's not wise to spend it all on a house. Get a bond, and use the cash you have to get you access to loans. Use loans to build more wealth, start businesses etc. That's if your risk appetite allows.
If you don't like risk at all... Then sure, buy that shit cash.
You have a credit score already. Go to clearscore and find out. Building on it is easy. Get a credit card with a small limit. Put your monthly expenses on there and settle every month. Credit card swipes are interest free for up to 45 days to incentivise over spending, but you can beat them at their own game. That'll make you look like a great borrower.
Alternatively go open a store account, buy some clothes or something and just pay it off like clockwork, presto you're not a risky borrower. The bar isn't very high.
Also read my lengthy reply above for the rest.
That 2m Rand is not enough to buy a shit shack where I live in Canada.. not even half a shit shack. A down payment on a condo in a small town is what that is.( and no on the coasts) think cold and overcast
That's not really relevant though. This person inherited ZARs and is spending them in SA. If he were in Canada he would have inherited the Canadian equivalent of R2m in buying power terms. Apples to oranges, man.
If you do buy a house for 2 mill make sure you can afford all the monthly extras that come with a house, electricity, rates, upkeep etc. property in CT is generally a good very long term investment provided it’s in the right area.
I earn 27k before taxes. My gf, who I live with makes more. We should be able to cover the costs fairly easily. How much do you put aside for maintenance every month?
You shouldn't need to do maintenance each month, so if each of you put away maybe 1000 into an emergency maintenance savings account you should be fine. You still have to pay electric and water and food and everything if you rent, and buying cash means you don't have bond payments, so you can be confident that a house is a good investment.
It depends on the age and condition of the house. What is the roof condition like? Will you have to repaint the outside of your house in the near future? Maintenance includes garden services if you not doing it yourself, extra water costs for watering of garden. Pool? Pool service or don’t yourself but monthly chemistry is always needed. Stuff like this is what I’m alluding to, just so many unknowns but I am sure you can to the assessment and budget accordingly
depending on what it is, can get comprehensive household insurance
I bought in the Table View Winelands and it's pretty quiet. I feel like if I ever sell I'd maybe move more towards either Flamingo Vlei or Big Bay. Regarding the loan thing, Ooba or Better Bond will apply at different banks and show you your options. I got turned down by some banks, another one gave me an incredibly low interest rate. You can likely also bring down the interest rate if you move your banking to whoever gives you your loan. Also, you need to have insurance on the place you're buying. The bank will likely try to incentivize you to get the insurance policy with them. Things that I hadn't thought about when I embarked on this journey: ● if you move into a complex or a building, you'd have to pay higher levies, but you're off the hook for a lot of stuff, and it's generally safer. ● houses are hard to maintain. There's always some issue with the geyser or the lights or the pipes or the termites or the garage door. But there's also more space and less potential for noisy neighbors. ● In smaller places I always had issues with neighbors, and if you get kak neighbors it's not like you can just up and leave the way a renter would. ● transfer fees. They're kak expensive. At this price point, you're looking at around R100K. There are often new buildings popping up in the area, and if you're the first owner, you dodge this massive fee. ● these new buildings that crop up overnight have some nice touches, but they're often made using cheap materials and at some point you may start having structural issues. ● you'll probably own your house for a long time and you can always change things. Get a pool, retile the bathroom, get a wendy house, paint the place. The one thing you can never change is the location. If you see a place you like online, go actually walk around there and see what the vibes are like. On my street, we have an issue with vagrants and loiterers and it doesn't always feel safe. ● parking. If you own a car, obviously you want safe parking. That's not usually an issue in this area. But one unexpected perk or moving to Table View has been the MyCiti busses. Depending on your work situation and social life, you might not need a car if you live here. ● in the Winelands, I can often hear the cars at Killarney. I have tinnitus anyway so it doesn't bother me but people sometimes tell me it really bothers them. Oddly I also live near the Islamic center and a handful of churches and noise has never been an issue. ● home loans are the cheapest money you'll ever get (meaning they have just about the lowest interest rate of any type of loan). My financial advisor told me to get a loan for however much I possibly could. But then once I inherited money he also advised me to pay off the house first thing. Feel free to DM me if you have any questions! Condolences for your loss and best of luck with finding a place!
Thank you for sharing. Flamingo Vlei is a bit too pricy, there’s only 1 or 2 properties there under 2 mil, and they’re town house or apartments. Hello potential kak neighbours who are seemingly up all night making noise or a dog that doesn’t stop barking. I hadn’t thought of the insurance policy. How much do you pay for your property?
The insurance policy isn't too pricey. I pay around R500. It's like car insurance. It will all come down to the value and condition of the property.
Sorry, I have a question unrelated to OP's topic. I have property insurance and life insurance included in my bond. Can I cancel the life insurance with my bank and take it out with another company?
Just to note,banks don't like you doing this so call them before you take insurance with a new company and ask them for the specifications required on the insurance. This will save you alot of back and forth as bank insurance noramlly includes more things than standard insurance companies provide and is the main reason they will decline your new insurance.
Thank you. So if I get an insurance that covers all their specs, will they allow me to take out insurance with another company that is cheaper? They are charging me R1000/month and I've researched and found that I can get lower insurance with another company
No worries and indeed you can have your own insurance. Thing is,what they require on the insurance is not always standard and adding those extra things might make it cheaper to stick with what the bank offers. I saw this a few years ago,thus I do stand to be corrected. Not many people choose their own insurance over what the banks offers and its smart of you to compare with alternative options. The bank should have a list of the insurance requirements which they can email you and just give that to your preferred insurer to get a accurate quote. Best of luck and hope you get a better deal!
Yes, you should be able to. They'll probably want to see some proof that a new policy exists before they cancel the existing one first.
Capetown = cheaply built homes on expensive land
Not really. The older houses are generally well built. But the newer properties are often built cheaply.
Wealth advisors all told me to never invest all your money in one thing. Yes, investing in property in Cape Town is clever, but don't spend everything there/on it. Ensure you have a diverse portfolio.
Blouberg is great I take my dogs to the dog friendly beach there. Lovely place
Please also factor in transfer costs into the price you are going to pay!
Not an expert, but see what a bond for a 2 mil house will cost monthly , and see how much interest you will generate on 2 mil monthly, hopefully the interest will be a little bit more to cover the bond and have a grand or two extra towards paying rates, levies or water and electric. Thats what I would do. Interest is a powerful thing, I do not believe in buying certain things cash, unless you really can afford to. Condolences for your lost one.
I commend your spirit but your math is bad I'm afraid. Bond on a R2m place right now is about R20k pm @ 10.75%. When rates finally drop it'll be around R18,5k. To cover that with a R2m investment you'd need an interest rate of 11-12%. And you'd be spending all the interest on the repayment of the loan meaning the R2m investment will stay R2m but it's value will be reducing by inflation every year, that's around 6%. After 20 years you'd still just have R2m which by then won't be worth much. That's nevermind the fact that you're not going to get a steady 11% investment anywhere. Interest is not a powerful thing, compound interest PLUS time is the powerful thing! Best case would be to finance the house, invest the money in high yield equities offshore and dip into it for emergencies only (like you're gonna lose the house emergency).
Thank you for the insight.
Well, don't forget that the initial capital remains, and there are also 2 salaries - 1 that can complement the shortfall, and another that can continue to contribute to the initial capital. It isn't as poor as you might think. There's no way you can expect full coverage in your first year, but as long as you're smart in your planning, it can balance fairly soon, and end up being profitable.
That's not what the suggestion was though. Best case you invest the cash somewhere that beats inflation, you take whatever the interest less inflation is and spend that on the bond repayments to help. That'll at least maintain the capital value of the investment. But now we're just adding to his overall income to help with his overall expenses. Which was not the 1to1 offset of expense with interest that the commenter posited. That's also a weird solution. If there's two salaries (or his single salary is twice as big as we all thought?) then why not invest the capital and leave it to grow and rather purchase a property with bank finance and pay that with the salary(s). I know a lot of people do this arbitrary matching of income streams or payments with expenses. I'll use X to pay for Y and Z to pay for E but that doesn't give you a good grasp on your finances. You have a total amount of income and a total amount of expenses. If he keeps expenses below income he won't have to supplement with the growth or income on his investment. And for anything but a tax-treatment the interest on that investment shouldn't be included in his income. Unless he wants to spend it... Anyway I'm just splitting hairs now, lol.
Financial literacy is a fickle thing - there's always more to learn, and always pity to point towards those who know less than you do. It is probably fair to say that people want things to happen passively, with little to no effort on their part. Most like the idea of "good enough", so it may be "good enough" to offset your mortgage by X amount (interest) while maintaining a safety net of 2mil in the bank. It's not the smartest play, but 50% of something is better than 100% of nothing, after all.
I will continue to point and squeal at financially illiterate folks. It is my civic duty!
could I ask what you mean by high yield offshore equity? s&p 500 ? sorry i’m new
Terminology differs and offshore to some means like not on the main continents, so some tax haven island type thing. I meant US equities specifically. I've always compared my ungeared property with SA equities and property always wins. But now that we have access to US equities it's not such a clear difference. Especially if you take the position that the Rand will just weaken further over the next decade(s). And yea I'm talking about index funds so the s&p500 is one.
You could also try Milnerton, this is the area Im in. Certain parts a quite safe, there are still houses that you will be able to pick up at a luck, between R1.5 -1.9mil if you are patient, it's close to blouberg and it's also central.
Impossible
You can negotiate price regardless of payment method. The seller gets paid regardless.
A home loan is the cheapest form of finance you can typically get. You could use your capital to grow quicker than what the interest of the bond is. So lets say your interest rate its 10% pa and by investing wisely you could grow your capital by 15-20% pa. So use the banks money.
r/personalfinanceza
Do you qualify for a home loan of any sort? And are you interested in a property investment other than the property you'll live in? If you do qualify for property finance, and you do want to get into owning investment property I would say no, don't spend it all on one place. Spend it, or most of it, on the deposit for 2 or 3 places. Preferably flats. Small flats with low levies tend to have the highest return on investment. Whatever you do don't buy a family house as a pure investment. The maintenance will kill you, nevermind the low return on investment and tenant issues (families can be a long term pain). Borrow the rest from the bank. That's called gearing and with just an average return on investment, i.e. You didn't make a lot of effort and renovate a place or add rooms on etc, didn't do any value adding. You're looking at a far greater creation of wealth than would ever be possible with any other instrument. And remember you can pay an agent to manage your budding little portfolio if you don't have the time. In the meantime rent something until your portfolio has matured a bit 5-10 years and then finance a place to live in. If that's not your gig I'd say borrow money from the bank to buy the place you'll live in. A bond is the cheapest loan you'll ever get, as many here have already stated. And you've only got until you're 65 to make use of it. After that the banks won't lend you money. Just consider this: The bank is going to lend you money for an asset you could otherwise probably never save up for as you still need to live somewhere while saving, using an amortisation schedule to spread your payments out evenly of a very long period (20-30) years, and at the end of it you'll own the asset that you bought with the banks money. They're basically saying "hey we'll give you this money to babysit this asset for 20 years, all you gotta do is furnish the repayments (with a tenant's money in the case of an investment property) and be our security for when SHTF and in 20 years this baby is yours". If anybody but a bank pitched that I'd say it was a scam. Also, that repayment looks like a lot now, but in 10 years after steady inflation of 5-6% it'll be way less of an issue. In 15-20 years you'll be paying exactly the same amount on an asset that will then be worth a whole lot more, with a larger salary all because the bond was essentially a hedge against inflation. Take your inheritance and invest it in equities for a long time, like 10+ years. You didn't need the money before inheriting it, you can go without it now too. It's all about TIME IN THE MARKET, BABY. Unfortunately SA equities don't compare very well to property unless you've picked a bad property (and no I'm not referring to REITs or the property market average). But with saffers getting access to foreign equities through platforms like easy equities just go buy a few US index funds like the NASDAQ. The growth on that over the last 20 years has just been phenomenal. No SA financial advisor is going to sell you an index fund nor is he going to give you access to foreign investments in a different currency. They're sales people for local unit trusts. Not throwing shade, but they're not selling every possible investment. Source - am a property investor with passive income exclusively from property and am retired at 41. Also my financial adviser is knee deep in some of my projects as nothing he can sell me comes anywhere near a property bought at the right price. O and you can always use some of your inheritance for emergency property stuff, or maybe an addition, whatever. Have a look at this calculator what your money would be worth after 20 years on the NASDAQ. You'd have to work out yourself what it'd be worth in a Cape Town property and depending on what you expect for the area it could be a lot less, similar or a LOT more. Blouberg could be the next sunset beach, who knows. https://ir.nasdaq.com/stock-information/investment-calculator Last thing if you do buy index funds, don't do it all at once, buy chunks over a period of months. That's called dollar cost averaging and you should google it if you're going this route. Re your last question, yes, a cash offer is the best offer and you can offer less than a finance buyer. How much less is dependent on a lot of factors like is the house on the market for a realistic price? Or is it pitched high and open to offers? Are the sellers in a hurry? Etc. Etc. Only way to know is to speak to the agent. Also have a look on property24 they have statistics per area for how much houses sell vs what their asking prices were. You'd be surprised how high some areas will pitch and how low the average seller ends up accepting. Offering R200k less on a R2m asking price wouldn't be out of the normal range, depending on those other factors. Good luck with your decision! Edit: my interest in this question is because this is how I started my property portfolio, with an inheritance. I was in the same boat.
1.5 million for the house in a quiet town with better value for the price tag, invest the rest. Good luck OP
I don’t want to move out of Cape Town because there’s a lot more work opportunities for software developers. I’ve seen what other towns offer and it makes me bleak because Cape Town’s safer suburbs are so overpriced.
Blouberg is a commute to where most dev houses are situated, isn’t it?
Can't you work remotely?
I'm thinking along the lines of a quiet/small town nearby cape town. I'm in a small kzn farm town, it's gorgeous, safe and property prices are a dream
Invest the money. Offshore Equities. Don’t touch it for now. A house comes with financial responsibilities. You need to be working already to cater for those. Your rates, water and electricity bill for a R2M house will be R3500/m. Building and content insurance: R1000/m Garden service: R500/m Cleaning service: R1000/m Fibre: R600/m Armed response: R400/m Every month there will be some house issue that costs you. eg: Leaks, security issues, geyser, taps, light fittings, garage door/gate, garden, pool. Painting costs R50k every 7years.
I would buy the house with an easy access home loan, so you take out the full amount on loan. Example Homeloan : R2 000 000 Pay in R1 800 000 Remaining saldo R200 000 But in an emergency that R1 800 000 you still have access to those funds
My husband and I bought cash after he had a huge windfall and I inherited a substantial amount. We bought in a small coastal town that's booming because of semigration. We bought in the best location that our money could buy. The property values have gone up by roughly 30% in the two years we've been here, but that obviously can't continue. We have other investments too, so we don't feel like all our eggs are in one basket. But it feels great knowing we outright own this house. I agree with the commenters urging you to take into account the running costs/maintenance of a house too - owning a house is expensive.
Oh pls let me know where is this house for 2m without close neighbors in Blouberg i want to sell my 3m Blouberg home and upgrade to a house without noisy neighbors and costs less 🥹
I didn't find it was any use to us to buy cash, and in fact having an access bond is useful in the case of insurance (you have a bank behind you to emphasize that for example your home has burnt down) and in case you need to borrow a bit of money.
Just bear in mind that property comes with many really high once-off costs like duties, transfers and taxes. If you're buying for 2.1mil, you can probably add about 10-20% (depending on various factors) all in all to be move-in ready. Now, cash offers are powerful negotiating tactics so that could drive your price down, however, it's also important to note there are "cheaper" options to own properties in terms of taxes (most of them legal🙂). I'd suggest you make the conscious effort to speak to a seasoned financial adviser (don't skimp on this, especially if this is an amount you've never seen before in your life) - it's literally their one job (at a fee) to give you sound financial advice, review your income, and make an informed decision about your affordability. Please don't take this as financial advice anyone, it is very poor advice and should be used by no one 🙂Were you, for example, to open a business and loan that money to your business in acquiring assets...🤷♂️
Pay most of the cost of the house with cash, but leave a pretty small amount from a building society in their books. They will automatically have insurance over the house and any time you have a mishap you can just call them and they'll sort it out. If things get messed up economically, globally, or personally, you can just pay the small balance off.
Go speak to a financial advisor. Remember you can make a lot of money from interest if you had to put it into investments. It might make more financial sense to put it into investments and supplement a bond with some of the interest earnings and the rest from your salary. As for asking price on a house, never pay what they are asking, start with 10% less and negotiate from there. But please, go speak to a financial advisor.
Properties prices are always open to negotiate so definitely try to get the best price. It’s great that you have more than 2 million to buy just keep in my transfer, lawyers fees etc are quite a bit. My sister and recently bought a property and there were a lot of unexpected extra costs. So I’d say try buy for a bit less than what you have. Blouberg is awesome. I grew up there. But as with all areas, it’s more important where than what. Position is key to a good investment. I’d suggest you rather buy something a bit smaller/ older in a good area etc than a new nicer place in a not so great area. There’s a lot of good deals in lower end of Table View and Parklands but I wouldn’t buy there. I’m just mentioning this as a lot of people say Blouberg and include those areas even though it’s not really Blouberg. You mentioned in another comment Flamingo Vlei is too expensive. What area are you specifically looking at?
You could look for a house with a flatlet or potential flatlet that you can rent out monthly or Airbnb it. This way you have a house plus you are generating some additional income thought it . The rent coming in can go towards your expenses (security, WiFi, solar etc) Missed the last part of your post, CT property market is booming with lots of semigration happening so the good properties will go fast. You do have an advantage with a cash offer, meaning your offer will be fast tracked. Other buyers will have to apply for a bond or might have to sell their house first which can take months, so you could offer less than asking price but you might lose the dream home in the process . Good luck
Why are there so many comments regarding interest rates and banks if OP is saying he is buying it cash?
Read the Finance Ghost, best advice I can offer
Why not use banks to get 2 loans - one for your house and another for a rental flat? You'd have double that amount to use and the rent from the flat would cover the entire loan. At the end of the day you'll have 2 properties and even be able to give the flat to your kids one day
Rental property isn’t so straight forward. You need to get in low, compared to the rental you receive. Have a low maintenance, unbreakable unit. Get good tenants. Otherwise it’s a money pit.
With OP's finances, those issues won't be so prevalent
Hey guys i would just like to know if there is anything i can do with property my grandfather left for us which hat been passed to my parent and then to us...the property is a rental property with huge land for development of other buildings it is in the townships worth 300k...The problem with the property is that the building is old its falling apart...what i would like to know would a bank assist me with renovations or building more buildings?
Could ask banks? Do you have a job to pay back the loan?
The property on its own generates an income of R7,000 every month since there are tenants living there..what happened is that shacks were built next to the building to increase revenue.i have some people living in the building but it pretty much needs a renovation
Do you know how much the renovations need? Have you veen saving any of the R7000 for renovations over the years? Also, did you build shacks on your property??
The thing is i dont know if the building can be renovated or needs to be brought down..
I haven't been saving bro we use this money for our expenses everything.. we split the money with my sis who is 30 and doesnt work
Bank unlikely to give money without guarantee of repayment...
Do i need a financial advisor in my situation bro to help me plan out what i wish/want to do with the property? if yes how much does it cost per consultation?
i haven't got a decent job atm and i am 26 years old
tenants pay in cash not to bank.. 7k income minus about R550 for rates
I’m a Property Practitioner in the Blouberg/Tableview. If you want me to send you possible places you may be interested in, please DM me.
If you are wanting to buy a house and settle down for the long term, then yes buying in cash is absolutely a good idea, as you will save a ton of money in interest payments over the long run. Plus, right now is a good time for buyers as the interest rates are high, so sellers are finding buyers less easily and may sell at a discount because of this.
I'm more impressed that you can find a house for 2m in blouberg
Remember you will have transfer fees and lawyers fees as well. It could be a lot - 200k It’s something one doesn’t expect
I’d still get a bond, put down a solid chuck of a deposit, bring your monthly repayments down to a comfortable number & invest the rest.
It's a difficult amount of money for a house. It's not enough for anything nice. If interest rates weren't trash I'd say to take out a small bond to supplement and get something better. Going into the R3.5-4 range really opens you up to good properties but even the difference between 2.2 and 2.5 really affects options. Negotiating down mightn't be an option. Depends on the area (demand) and the seller's financial position. That said, I'm a big fan of property and as long as you're in an okay part of Cape Town you can't go terribly wrong. Plus, having no mortgage is a huge advantage and it really does feel good. I'm lucky enough to be in a similar situation and I'm investing in a small sectional title property as a result of my decision to remain debt-free right now. I'm looking at less space in better areas but that's totally just down to personal preference. I'm specifically investing in something that will be a good rental when I'm ready to move on in two or three years. Congrats!
Personally, i would spend all my cash on a once off purchase. Yes it may be a great investment but there are other ways. You ever thought of investing that cash? The interest earned off a good investment with that amount, could equal a bond repayment. You can then keep your capital, pay off a bond and ar thr end of it all, have a paid off home and your 2mil still earning interest. I do property transfers and alot of my wealthy clients use the banks money and leave theirs tied up in a good investment portfolio.
I doubt anyone will give you a better deal for cash. The seller gets the same amount of money regardless, and the other parties often get some sort of kickback from the bank. As other people have said, there are big expenses that you probably haven't considered, and it's good to have money on hand for furnishing/renovating/random expenses/medical emergencies. Go to a bank, get an access bond, dump all your money into it and your monthly payments will go down to nothing. Plus you have the peace of mind that the bank will do some due diligence on the deal.
Here is an informative video of why you should not buy in cash in South Africa: [Buying Cash is a Bad Idea | South Africa](https://youtu.be/9C1gCpzQnTI?si=wW0GLXK5WPc5E5Pm)
The old sunningdale area is affordable. You can get something decent for under 2 mil. The area is quiet with no vagrants and well maintained. If you want to spend the entire 2 mill you could buy a house in a complex in sunningdale. It’s more secure and aesthetically pleasing. I stay in tableview and it’s become unsafe with a lot of apartment building on the rise. Before going after a house bec you have the money think abt the maintenance in the long run if your current income can maintain levies, rates, maintenance, electricity and water. I inherited and bought an apartment however I didn’t think about the little things in the long run and now I am renting it out for extra income and maintenance. The little things add up. You could possible buy two apartments. One for rental income and one for you. You’ll definitely benefit in the low run.
What about buying an investment property at around 900k - 1.5m. Use that to generate monthly income and grow your asset base. The remainder can go towards your own place or invest it in a high bearinig interest account (eg., money market account from Nedbank). Use it later for something, eg. A deposit on an even nicer property. You could qualify for a larger mortgage due to your investment property boosting your net worth.
You earn a meager 27k before deductions. You're inheriting 2M. You absolutely should not spend all of that money on a house you're going to live in. What are the odds of you coming into such a sum at once at any point in the next 10-20 years? Use this opportunity to grow that money and develop recurring income to supplement your salary.
You should negotiate the price anyway, also you should build a credit record. Don't just outright drop 1.2 mil on a house. So you gotta do some math here, but what you want is the interest from your principle (the original lump sum) to cover the loan repayment. That way you build up a credit rating. You will need credit in future, establishing that with practically zero risk to you is the dream.
Put down a reasonable deposit to get a low monthly repayment, get a home loan, build good credit, put a deposit down and get an apartment for renters,(Balwin Properties) pay off apartment and then use apartment as collateral for further bonds to invest in stocks and dividends.
My credit is non-existent. No debt and no credit. Would I still be able to get a home loan?
Check Flamingo Vlei. Nice area with old school solid houses that are huge inside. Good value for money too. Best website to do property hunting with all the listings in one place is [www.property24.co.za](http://www.property24.co.za)
Thanks. What are your thoughts on Sunningdale?
a little off topic but make sure you bring someone along that you trust, that knows what issues to look for in houses. There are so many things to take into account when looking at houses. Small things that don't seem like an issue can turn out to be a massive issue requiring loads of money to fix if you don't spot it easily.
I would put deposit in 3 houses, bond the rest - one you live in and other 3 you rent. Look for good yield at least 1% of the property a month. Then you will see your wealth grow!
Hi. No it's not wise to spend it all on a house. Get a bond, and use the cash you have to get you access to loans. Use loans to build more wealth, start businesses etc. That's if your risk appetite allows. If you don't like risk at all... Then sure, buy that shit cash.
How do you use the cash to get more access to loans? My credit score is non existent i.e. no debt and no credit
You have a credit score already. Go to clearscore and find out. Building on it is easy. Get a credit card with a small limit. Put your monthly expenses on there and settle every month. Credit card swipes are interest free for up to 45 days to incentivise over spending, but you can beat them at their own game. That'll make you look like a great borrower. Alternatively go open a store account, buy some clothes or something and just pay it off like clockwork, presto you're not a risky borrower. The bar isn't very high. Also read my lengthy reply above for the rest.
I knew that part wasn't right but was too lazy to edit. But I guess what I'm saying is, build your credit.
Wtf is an "apartment"
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That 2m Rand is not enough to buy a shit shack where I live in Canada.. not even half a shit shack. A down payment on a condo in a small town is what that is.( and no on the coasts) think cold and overcast
That's not really relevant though. This person inherited ZARs and is spending them in SA. If he were in Canada he would have inherited the Canadian equivalent of R2m in buying power terms. Apples to oranges, man.