How to make Team Work Dream Work!

When you invest in the UK you will need a team of people to work with you. The table below includes a list of the skills and companies you will need on your side as you navigate the challenges of investing in a foreign country.

BUILDER SOURCING AGENT ARCHITECT
SOLICITOR MANAGING/LETTING AGENT ACCOUNTANT
MENTOR FOREX DEALER BANK MANAGER
INSURANCE BROKER NETWORKING CONNECTIONS LANDLORD COUNCIL
BUILDING INSPECTORS AFFORDABLE HOUSING AGENT BOND ORIGINATOR

It can be quite a challenge keeping track of what proof of identification Kate the solicitor asked you to send through and by the way, when last did you heard from Pete the originator? Did he schedule the follow up meeting around Lloyds and their proposal for 3pm today – or was it two days from now?

I have implemented a few simple techniques that have made my life a lot simpler.

  1. Create a new email address to be used solely for your UK property investments. I pay R9 per month for a website through Afrihost and with the website, I get two free email addresses. Priceless! This way, emails related to our investments don’t get lost in the masses of personal emails I receive on a daily basis.
  2. Keep a spreadsheet of the people you are in regular contact with along with their email address and contact number. In fact, include anyone you ever speak to on that spreadsheet! Last month, Adam our Managing Agent sent me an account from Welsh Water and I immediately replied saying I had no idea who Welsh Water was or why they wanted payment from me! I then checked my spreadsheet and discovered I had actually been in touch with them over a year ago. Urgh! I had to confess to Adam that I did in fact know all about it.
    • Key learning: create a spreadsheet AND refer to said spreadsheet!
  3. Reply promptly to all emails received. More often than not, the property investment will be something of a sideline that you try to juggle while holding down the job that actually pays your home bond and the kids school fees. It is easy to let the days slip into weeks and in some cases, forget to respond completely! Remember that you are investing in a foreign land where you more than likely have no credit history. Think of your email interaction as being as important as building that credit score only through your emails, you are building a character reference. People in the industry are connected and if you fail to respond or don’t respond timeously and clearly, Tracey the sourcing agent is less likely to keep you informed when a hot new deal hits her books.
  4. Pick up the phone. Email communication can so easily be misinterpreted and before you know it, Frank the builder no longer wants to address the leaking tap in the newly renovated flat because he thinks your last email was too demanding. Where possible, try to communicate via skype so you can see each other – so much is lost when you can’t see the other person’s expressions. If skype is not an option, pick up the phone and speak words to each other. It will help keep communication channels open and ensure there is no room for misinterpretation.
  5. If you feel there is an issue around a certain topic, do not allow the time lag between the issue identification and your action to resolve it to grow. While chatting to other investors, you discover that you are paying 10% more for your property insurance than they are. You allow that knowledge to stew over a week instead of immediately calling Candice your insurance broker and allowing her to explain possible reasons. The longer the lag, the more room there is for mistrust and, potentially, additional costs to mount. After chatting to Candice, it turns out your property is insured for bricks and mortar plus basic household contents – the cost was indeed justified!

 

Make sure you take the time to implement and follow these easy steps. After all, clear, consistent communication is the cornerstone of all successful relationships.

 

How to be a Fearless Property Investor

“A great deal of talent is lost to the world for want of a little courage. Every day sends to their graves obscure men whose timidity prevented them from making a first effort.”

Sydney Smith

If you want to be a successful property investor, you need to be bold, determined and fearless. More importantly, you need to take ACTION!

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Stacey attended a 3 day training course with me in 2015 and like me, signed up for the big budget additional training to learn to invest in the UK. She flew over to London to attend the course then traveled across the country viewing properties and meeting people who would form part of her team. Once back in SA, she analysed deal after deal, spoke to sourcing agents and banks but she would never commit. What if she got it wrong? What if she lost bucket loads of cash? What if there is a better deal out there? Now two years later, Stacey has nothing to show for all her efforts.

Fear will paralyse you. Fear prevents you from chasing your dream. Fear comes at you in many forms:

  • fear of failure
  • fear of getting it wrong
  • fear of losing lots of money
  • fear of what others might think

These fears will creep into your dreams and turn them into nightmares.

So how do you overcome fear as an investor? Follow these 5 steps and feel your bravery grow:

  1. Do your research. Knowledge is power and if you do the ground work, it will be easy to determine whether a property is worth investing it.
  2. Run the numbers. Do your calculations to make sure the property will be cashflow positive. Remember we make money when we BUY! Make sure you collect all the figures for this exercise.
    • Bond repayment
    • Water and lights
    • Rates and taxes
    • Levies
    • Gardening service
    • Pool service
    • Security fees
    • Management fees @ 10%
    • Repairs and maintenance @ 12%
    • Any other costs
  3. Take emotion out of the equation. Do NOT get attached to a property, you need to buy based on the numbers, not based on how much you love that landscaped garden, that designer kitchen or those classic crystal chandeliers!
  4. Surround yourself with experts. Read blogs (well done, you are already ahead of the curve J), go to networking events to spend time with likeminded people. As a bonus, you’ll receive encouragement from other investors, learn from their mistakes and grow your property knowledge.
  5. Be brave! When you find a property that works, just do it. Sure there might be a better deal on the table tomorrow but waiting for the perfect deal will see the weeks slip into months and the months slip into years. The best way to learn is through action. Courses can only teach you so much, actually going out there, buying an investment property and running it as a rental property will teach you priceless lessons.

Unless you take bold action, nothing changes. In 5 years from now you’ll look back on your life and ask yourself what did I achieve? Make sure you have a great answer for that question and remember – nothing moves until you do.

 

Getting Your (Financial) Act Together

So you found your dream home and now all you need is a bond! That’s when the real work starts. Expect to be faced by reams of paperwork from the banks that will have you wondering if it’s all worth it. The key to overcoming this obstacle is to get on top of – and stay on top of your finances. If you don’t currently own property, going through the motions of determining your net worth will prepare yourself for the day you are ready to commit to a mortgage.

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Even if you are already a property investor, a few key tips and tricks will make the process a lot smoother when you are ready to invest in your next property.

Right, let’s get started. Gather the following documents

  • Proof of income
  • Copy of your South African ID or passport
  • Proof of current residential address
  • If you are an employee, you’ll need an official salary slip or stamped bank statement (either option needs to show history for the last 3 months)
  • If you are a self-employed entrepreneur, the process is that much harder. You’ll need to prove that a regular monthly fixed salary has been earned from your business and received into your personal cheque account, preferably on the same day of every month. Statements of your business and personal accounts of at least six months up to a year history period might be required.

In addition to the documents detailed above, you will need to complete an income statement and a personal balance sheet which compares your financial assets (what you own) with your financial liabilities (what you owe). The sum of all of the money you owe is your liabilities. The difference between your assets and your liabilities is your net worth. Simply put, an asset is something that puts money in your pocket while a liability is something that takes money out of your pocket!

In order to start preparing your income statement and balance sheet, you’ll need your latest bank statements, as well as the details any loans you have. Once you have all of that information available, start developing your balance sheet by listing all of your assets (financial and tangible assets) with the values.

  • Cash (in the bank, money market accounts)
  • All investments (mutual funds, university savings accounts, individual securities)
  • Home value (the resale value of your home)
  • Automobile value (the resale value of your car)
  • Personal Property Value (resale value of jewellery, household items, etc)
  • Any other assets

The sum of all of those values is the total value of your assets. Your goal should be to continually increase your assets.

Next, you can look at your liabilities, which should be everything you owe. Here are some common liability categories:

  • Remaining bond balance
  • Car loans
  • Student loans
  • Any other personal loans
  • Credit card balances

Understanding your Income Statement and your Balance Sheet.

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Categorise all your expenses and income streams into their respective columns. Don’t forget to include any income-producing assets and income-draining liabilities.

This is the cash-flow pattern of an asset:

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This is the cash-flow pattern of a liability:

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Once you have these documents in front of you, it will be easy to identify which liabilities are draining your budget, allowing you to get rid of the ones that you no longer need or want.  It will also give you a better understanding of where your income is going, and open up to new ideas for expanding your income.

If you have the financial resources to pay at least 20% or more of the purchase price as a deposit and also have cash available for the transfer duty and attorney fees, it will substantially increase your chances of obtaining a mortgage bond on a property.

Repeat this process twice a year to ensure your finances are up to date. Having all this information on hand will be invaluable when you start the bond application process!

AUCTIONS: Road to Heaven or Highway to Hell?

 

 Highway to hellp  Road to heaven

Auctions are a great way to pick up properties at next to nothing. Everyone knows that, right? But is it true? Let’s take a closer look…

There are two kinds of auctions:

  • Private auctions
  • Sheriff auctions

Private auctions which takes place at the house. The auctioneer deals directly with the seller. You don’t take on owners debt so there is less risk involved. This is a fairly safe way of buying a property, less chance of picking up a deal but equally, less chance of picking up a lemon.

The second, hugely risky kind of auction is the Sheriff’s Auction. The sheriff will only sell banks or body corporate properties. If your bid wins, you also ‘win’ all the outstanding debt on the property such as rates and taxes, water and lights. You also ‘win’ the tenant (if there is one) which can be very risky as they might refuse to allow the bank access which in turn, means no bond for you. To make matters worse, they might refuse to leave!

Do not attempt this strategy unless you are well prepared!

No no wait, just before you run away screaming…it is possible to manage the risk!

Do mock charges, go to auctions, pretend to buy – but don’t. Get there half an hour before hand. Sit at back to see who you are ‘bidding’ against. It is absolutely critical for you to practice being at auctions, get used to the feel of the room, the energy of the room, the tension, the excitement and the anxiety in the room. You’ll learn who the various players are in the room – the bankers will be dressed in suits and will nod when the reserve price is reached, signalling to the auctioneer that the they are happy for the property to go for any price from here on out. Watch for the professional property investors, looking casual, hands in pockets, leaning up against the wall. The newbies will be right in front, wringing hands, dripping in sweat, wide eyed and terrified! The main point of doing mock charges is to ensure you don’t look like the newbie. Confidence and determination are key to success with this strategy.

Once you feel ready to actually bid at an auction, go to the greengazette.co.za/auctions or www.sheriffhq.co.za to find local auctions. You can search for properties by province or by sheriff. Find out where and when the property is being auctioned. Get the details of the lawyers involved; call them to find out what the outstanding rates and taxes are as well as the water and lights bills. Take this figure OFF the amount you plan to bid at.

Next step is to do your due diligence. Check up on sales in the area. Are properties selling and if so, for how much? What are the demographics? What is the average age of the area, are there schools, universities, parks, shopping centres?

If it all adds up, drive past the property. The key is to GAIN ACCESS. DO NOT buy a property you have never seen! Get creative, pay R50 to the gardener to get in, be nice to anyone there to gain access. You need to check the structure of the buildings on the property. Buying a property with someone living in it can be very risky as they might not let the bank in which in turn means you won’t get a bond against the property. The nightmare could continue if they refuse to leave. If you can’t establish if there are people on the property or not, drive past the property at night looking for any light. If there are any lights on or candles burning, chances are excellent people are living there.

Everything still on track? Head for the auction!

Get the cash together for the deposit you’ll need to pay in order to participate in the auction. Most auctioneers demand R30,000. You’ll also need to pay sheriffs commission which can be up to a max of R13000 and you’ll be liable for a 10% deposit within 10 minutes of you winning the bid. When you are at the auction, the auctioneer will disclose the outstanding figures on the property. Remember to deduct this amount from the maximum bid you were planning on going to.

  • STOP bidding when you reach your limit, go with your calculator not your heart!

If your bid is successful, you will be required to sign the terms and conditions which will include a clause stating that you have 21 days to pay the balance of the purchase price. In reality, you have 28 days because when 21 days lapse, the sheriff will send a letter saying you have breached it but you have 7 days to fix it.

  • If you cannot raise the cash, the property will be put back on auction and buyer liable for all costs!

Now you can finally visit your new property and get a decent look at it. Remember, you buy the property ‘voetstoets’, which means once the hammer falls, you as the buyer must:

  • insure the property
  • get electrical certificate
  • cover all the outstanding Rates and taxes, water and lights
    • Please note that these figures will accumulate against you until transfer – don’t forget to take that into account!

The Do’s and Don’ts are more to this strategy than meets the eye. Make sure you do your homework. This is a great strategy but it is NOT for the faint hearted!

Never Ending Story

Once tenants start defaulting on payment or looking after your property, buckle up for the long ride!

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It is essential that your lease agreement includes clauses around defaulting – I have included the clause we use below for your easy reference

BREACH

  • The Landlord shall be entitled, without prejudice to its other or accrued rights, to cancel this lease forthwith in the event that:
  • The Tenant fails to pay the rental or any other amount due in terms of this lease on due date;
  • The Tenant breaches any of the other terms or conditions hereof, all of which are material, and fails to remedy same within seven (7) days from date of receipt of written notice calling upon it to rectify such breach;
  • The Tenant commits an act of insolvency.
  • There is a transfer of the shareholding or members’ interest in the Tenant (if applicable) without the Landlord’s prior written consent thereto.
  • The Tenant, being an individual, dies.
  • The Tenant, being a partnership, dissolves.
  • In the event of this lease expiring or otherwise terminating and in the event of the Tenant failing to vacate the premises and to redeliver possession thereof to the Landlord thereupon, the Tenant shall be obliged, for so long as it remains in occupation, to continue to pay to the Landlord an amount equivalent to the rentals and other charges as would have been payable by the Tenant to the Landlord had the lease remained in existence, which amount shall be regarded as damages for holding over.
  • Should the Tenant fail to make payment of any rental or other amount payable to the Landlord in terms of this lease on due date, the Landlord shall be entitled, without prejudice to its rights, to charge interest on such amounts at a rate of 2% above the prime lending rate from time to time of the Standard Bank of South Africa Limited

Use a standard eviction notice, I can provide a sample upon email request.

Once you start the process, you need to pay close attention and follow up exactly as you say you intend to. Do house visits as scheduled and agreed upon, send regular email reminders of the time lapsed since the eviction notice was sent. Take lots of pictures throughout this process as a means of mapping what the property looked like when you first rented it out, what it looked like when the eviction notice was served and then the progress, if any, during the eviction process. If you have house insurance, you may need the pictures to support your claims.

It is important to keep emotion out of all your dealings with the tenant, just stick to the facts stating them calmly and repeatedly when called upon to do so. We found this part incredibly hard when a tenant completely trashed our once beautiful rental home, the temptation to hurl accusations and bitter comments was at times overwhelming. Take long deep calming breaths, stick with the process to avoid escalations into violence, abuse or defamatory comments.

Patience and persistence pay off. As the eviction date grew closer and no move was being made towards the repair of the property, we emailed the tenants stating that if everything wasn’t back in it’s original state by the due date, our team of builders would be moving onto the property to start the repair. We were lucky that the tenant just left prior to the final eviction date since if we had moved builders on site, they would have been able to report us to the courts.

If you are facing an eviction situation, contact eviction lawyers to guide you through the process. Do not, for example, use a divorce lawyer who is a friend of a friend who offers to help out – eviction lawyers will often offer lower rates and take less time since it is their area of expertise. The laws in South Africa tend to protect the tenant above the landlord so please tread carefully!

 

 

Evicting Tenants

Cambridge Street. An oasis of luxury and beauty tucked away in a quiet street in Benoni, Johannesburg. “It’s perfect” I said. “We must have it! Tenants will queue to live in such a magnificent place!” And so it came to be that in 2015, we bought our good friend’s deceased mother’s property.

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Lounge 2.pngWe advertised on Gumtree and between the flurry of phone calls, were astonished to receive a call from the UK. Jack was looking for a ‘forever home’ for himself and Nicky. Sure they traveled a lot and he was British and she was South African, but one day, they’d settle down and where better than in our beautiful home. The two year lease agreement was kicked off with champagne and celebrations. A year down the line, Jack spends less and less time in South Africa. Nancy becomes quieter and quieter. Rent is consistency paid but utilities, Nancy’s part of the deal, stop being paid. Phone calls are not returned. Excuses are made. I’m unavailable. So very sick. Sorry, gone away for the weekend. Eventually, Quentin just arrives and gains access to the property. Oh. My. Word! What a mess!

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Marijuana plants, broken pots, green unkept pool – complete disaster. What was once a beautiful haven had been reduced to a messy, grubby sandpit. They had turned paradise into a dirty smelly refurb! The kind most investors are on the prowl for. Noooo!!!

Wooden lattices had been torn from the walls and burnt. The koi pond – empty and the koi? Sushi? Trees chopped down and burnt in a big bonfire on the front lawn. At least 35 cats lived in the house with no litter trays leaving the carpets soaked in urine. The pool had gone to ruin, carpets were torn. The wendy house had been converted to a marijuana hot house!

Jack was mortified. “It cannot be” he said. “How could it have happened?” he wailed. “We MUST fix it, I WILL fix it” he promised. Then after a few days, he confessed to not being able to get hold of Nicky and being at a loss as to how to move forward. “No problem” we said. “Here is a breach of contract letter along with a formal notification to return everything back to original condition or face eviction.”

“I need a few days” he said. “So shocked. Need time.” “No chance” we said. “It has gone on too long and it is over. Fix it or leave.” Luckily in this instance, the tenant made it really easy for us. Lack of compliance to the notification will result in a phone call to the local cops who will happily remove them for us. Of course, that doesn’t fix the R84,000 worth of damage or bring back the trees and the koi, but at least it will get them out.

Key learnings?

  • Make sure regular monthly visits are top priority f you are managing the property yourself. All this damage took place over just 6 weeks!
  • Take pictures at every visit for your records. No doubt the marijuana plants have already been removed but we have evidence and the means to at least scare them out of the house.
  • Use formal eviction notifications.
  • If property is not your full time occupation, pay an agent to keep on top of things. If you find the right one, the commission you pay them is priceless!
  • Just because things have been going well for  a year is no indication that it will continue in that line.
  • Even if you develop a relationship with your tenants, treat it like a business. Compliance or eviction, there can be no middle ground.

And now the hard slog begins once they leave. How do we turn the barren, smelly wasteland back into a magical oasis? Watch this space…

Musings on Property Investing

This is the post excerpt.

“The best investment on earth is earth.”     Louis Glickman

Property investment is no easy walk to financial freedom. There are steep hills to traverse, difficult tenants to navigate around and financial challenges to overcome.

This blog shares stories from our property adventure. The good, the bad and the ugly. We have been investing in property in South Africa for the past 15 years and in the UK for the past 2 years. Regrets? We’ve had a few. But then again…:-)

Follow this blog to get weekly updates on the trials, tribulations and triumphs faced as we grow our portfolio locally and abroad.

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