How to buy a house | May 2016
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Transcript of How to buy a house | May 2016
How to buy a home?
Introduction
WHY
1. Wealth Wealthy
1% Financially independent 5% Still working
16% Dependent on the Government 52% Dead
26%2. Who wants to be wealthy?
3. Ignorance Difference between truth & perception
4. Knowledge
“The right information at the right time is nine tenths of any battle!” Napoleon
“Knowledge is Power!”
“Informed Knowledge is Power!”
Who is involved? Seller – individual or developer Buyer – individual, company or trust Estate Agent/ Developer Banks• Buyers• Sellers Mortgage Originators Lawyers Bond Attorney Transfer Attorney SARS / Tax Offices Deeds office Municipality Body Corporate
6 Steps to Purchasing Property
Strategy
Find
FinancePurchase
Manage
Decision
Decide
Biggest inhibitors• Time• Lack of understanding• Fear• Knowledge• Money Law one ”Invest in yourself!” Get involved
Strategy
Very few people have a strategy – it is adhoc purchases and based on friends advice!
Most people buy houses they want to live in, not the best investments.
• Do you buy shares in a company you would like to work in? UK Market – early 1990’s is a very good example
Strategy
Strategy
It is all about the financial numbers What is the worst case scenario? Property has increased by 12% in SA and 9% in the UK &
USA over the last 30 years with inflation being 9% and 3% LONG TERM INVESTMENT REAP example
REAP
It is all about the financial numbers What is the worst case scenario? Property has increased by 12% in SA and 9% in the UK over
the last 30 years with inflation being 9% and 7% LONG TERM INVESTMENT Property Pro example
Multi Tiered Strategy
Top+R2 million ($200+)
MiddleR1 mil – R2 mil ($1m to $2m)LowerR500k – R1m($50k - $100k)
Key highlights
1. First project when I was 13
Key highlights
2. First property when 22
3. First London property when 24
Key highlights
4. Thousands of South African Investments
Key highlights
4. Hundreds of London / UK Investments
Key highlights
Key highlights
5. Hundreds of Australian Investments
6. Hundreds of American Investments
Key highlights
7. Not just residential, both commercial & industrial
Key highlights
8. Commercial with $10k
Key highlights
Off plan vs Bricks and Mortar
Transfer Fees Cost of Capital – see example Speculation Time to save Cost per square metre Buy at today’s prices Start paying it today
Find
Know what you are looking for! Key decision:
a) Buying as a house to live in Emotional purchase Location Location Location Schools, offices, shops, entertainment, hospitals, security,
transport, etc.
b) Buying as an investment property Does it fit with your investment strategy Are you trying to achieve capital appreciation or passive income
form rental? 100 Point System
Global Investment Due Diligence System (Big Data Analysis System)
-International currency movements & impact analysis-Macro country based scenario planning -Financial structure optimization system-Country development partner trust assurance system-Micro city based scenario planning (scores the best suburbs to invest in)-REAP - Property investment yield forecasting tool (cash flow, tax, IRR)-Pre-Purchase Due Diligence (Fraud prevention, Property condition, Appraisal) -REMS - Maximize your investment through ongoing management-Wealth Assist Solution - Live & online customer assistance call center, 1to1 support. -Customer Experience - Secure apps, secure investment platform.
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GIIDSOur Secret Sauce:
Where to invest?
5 continents, 9 office locations, truly global, on-the-ground teams.
THE GLOBAL SOLUTION – Wealth Migrate
Clem Sunter
Endorsed by 40 Global Leaders and Property Experts!
Global Scenarios
Clem’s scenarios
Facts
4 Dimensional Model
Global Property System (GPS)
Facts
Find
Dolf De Roos - To find a deal one needs to:• View 100 properties, • Make a offer on 10• Be accepted for 3• Buy one!
Law Two – “Always buy property with a twist” Law Three – “ Always buy from a motivated seller!”
Some things to consider
New developments in growing marketsBuy a property tomorrow at today’s pricesPhase 1 = usually best value
Worst property in the best streetRedevelopment / Refurbishment
Older areas undergoing redevelopmentUrban regeneration: Johannesburg & Cape Town CBD, Kelvin,
Woodstock
London, Zone 1, 2, 3 Added infrastructure
E.g. New tube stations, shopping centres, GauTrain
Finance
Can you get a mortgage? How much? Law Four – “Always do the financial analysis before one
buys!”• Know what you can afford• Do preliminary financing• Do financial modelling on all perspective property
purchases• Understand all the costs
Law Five – “Look at cash flow first, then capital appreciation!”
Power of leveraging
Bought July 2008 R750,000 Market
Transfer Costs R12,500
TOTAL COST: R762,500
Value in July 2009 R840,000 (12% growth)
Profit R77,500
Growth (ROI) 10.16% = Profit / Cost
Excludes agent fees etc
Power of leveraging
Excludes agent fees etc
Bought July 2008 R750,000 Market
10% deposit R75,000 90% Leverage!
Bond & Transfer Costs R19,000
TOTAL COST TO YOU: R94,000
Value in July 2009 R840,000 (12% growth)
Profit R71,000
Growth (ROI) 75.53% = Profit / Cost
Power of leveraging
Excludes agent fees etc
Bought July 2008 R750,000 Market
10% deposit R75,000
Bond & Transfer Costs R0 Off Plan
TOTAL COST TO YOU: R75,000 No Costs!
Value in July 2009 R840,000 (12% growth)
Profit R90,000
Growth (ROI) 120% = Profit / Cost
What does this mean for you?Check the numbers!
Banks consideration for a mortgage
The property itself: value, area (risk) Insolvent / Criminal Record / Judgments Credit Rating (www.credithealth.co.za) Income Statement: Income & Expenses Balance Sheet: Assets & Liabilities Suretyship Qualification, Job Industry & Position
• Earning power in SA? Other property in South Africa All this affects offer of loan amount + interest rate
granted Income vs Asset Based Lending
Schedule of how much you can borrowCalculated at 11% over 20 years
Purchase Price Bond Amount (10% deposit) Gross Income Needed Monthly Repayment
R200,000 R180,000 R6,500 R1,950
R300,000 R270,000 R9,500 R2,850
R400,000 R360,000 R12,500 R3,750
R500,000 R450,000 R15,500 R4,650
R600,000 R540,000 R18,500 R5,550
R700,000 R630,000 R21,500 R6,450
R800,000 R720,000 R24,500 R7,350
R900,000 R810,000 R27,500 R8,250
R1,000,000 R900,000 R30,500 R9,150
Types of products
Variable rate Fixed rate Access bond facility (Standard Bank),
Flexi Bond (Absa) Accelerator Bond (Absa) First time buyers mortgage (used to be
able to get 108%) Interest only mortgage (not yet in SA)
Purchase
Some manage to persevereOur first example
Law Six – “Property is secured in law, but it is relationships which bring in the money!”• Negotiating• Sourcing• Managing the process• Management
Law Seven – “Be in control, manage risk!”
Purchase Process
1. Signing Offer to Purchase (OTP)• Subject to finance• Use sellers bond agent
2. OTP accepted by seller• 7-14 days for deposit• Up to 30 days for mortgage approval
3. Complete bond application with supporting documents
4. Accepted OTP is returned5. Send FICA to both attorneys6. Sign bond & transfer Docs
Costs Transfer Duty (Individuals)
Deeds Office search fee Deeds office fee Bond Attorney Fee | Can be included in price on new
builds Transfer Attorney Fee | Can be included in price on new
builds Post & Petties
Value of the property (R) Rate0 – 750 000 0%750 001 – 1 250 000 3% of the value above R750 0001 250 001 – 1 750 000 R15 000 + 6% of the value above R 1 250 0001 750 001 – 2 250 000 R45 000 + 8% of the value above R 1 750 0002 250 001 – 10 000 000 R85 000 +11% of the value exceeding R2 250 000 10 000 001 and above R937 500 +13% of the value exceeding R10 000
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Bond Initiation Fee (± R5,700) Valuation Fee (± R3,000) Rates & Taxes (possibly upfront) Levy Clearance Certificate (± R450) FICA Fee (± R250) Other incidentals (± R5,000) Notary fee
Costs
Tax
Own Name Partnership CC Company SA Trust Offshore TrustTransfer Duty 0-8% sliding scale 0-8% sliding scale 10% 10% 10% 10%Income Tax 0-40% sliding scale 0-40% sliding scale 30% 30% 30% 30%Tax on Distributions 0% 0% 12.5% 12.5% 0% 0%Effective Tax 0-40% sliding scale 0-40% sliding scale 38% 38% 40% 40%
Primary ResidencePrimary Residence
Capital Gains Tax
i) Income generating property
investment portfolios,
shares held by a trust ii) Property clubs,
syndicates
Primarily Used For
15% 15%25% of gain at your marginal rate - effectively 10%
25% of gain at your marginal rate - effectively 10%
20% 20%
i) Primary residence ii) Non-income generating
properties iii) holding vehicle
Law Seven – “Optimise your tax and financial strategies!”
Tax implications on rental income (SA=source based tax system)
SA tax number essential (IT77 from www.sars.gov.za)
Capital Gains
% of gain Tax Rate Effective CGT
Individual 25% 0-40% 0-10%
Company / CC 50% 30% 15%
SA Trust 50% 40% 20%
Individual’s CGT Allowance• Primary Residence• R2 million allowance per family, i.e. not R4m per couple• No other primary residence, temporarily outside the
country
Manage
Managing your tenant• Ski slopes of Switzerland• Friends and family?
Be careful not to underestimate time, cost & frustration involved
Avoid vacancies!• Missed rent• Management fees• New tenant = advertising / finding fee• House-cleaning costs• Possible damage
OLD SYSTEM IS BROKEN
* 2015CF-RE Crowd Funding for real estate, Massolution.com
Don’t Trust the systemPeople are tired of being poor, with 76% of people in USA being concerned about their future and only ¼ believing in the financial system.
Little to no TransparencyYour money is put in structures which are very complex and you have no idea what property you have invested in, have no control and most importantly don’t have access to the actual numbers.
Higher fees, lower returns, no AlignmentThe returns are low, due to the excessive fees of middlemen, who dilute the return and result in less than 1% of people in the Western World being able to retire wealthy. There are too many people between you and the property, with interests not aligned.
COMPETITORS
The two leading crowdfunding companies, Fundrise and Realty Mogul, have 42,936 and 12,000 active users respectively, and have recently
raised $142m and $82m. Neither operate outside the US.
THE PROBLEM - GLOBALLYMiddle-class Real estate investors are recognizing the power of real estate crowdfunding, but do not yet have an easy & safe way to invest in global real estate markets.
Limited to “in-country” deals only, causing currency and diversification risks.
Barriers very high to buy & manage offshore.
Offering global deals is extremely difficult. (legal & banking, trust, compliance; deal quality, partners, language)
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5 continents, 9 office locations, truly global, on-the-ground teams.
THE GLOBAL SOLUTION – Wealth Migrate
OUR STRENGTHS
Striving to build a trusted, simple, and transparent marketplace for investors all over the world, of all investment experience levels and of all financial calibers
Geographic diversity reducing systematic risk
Onsite due diligence for each property
Only invest in unique properties
Monthly updates Automated ‘bad
actor’ and security checks
Investments start at USD10,000 only
Leverage on our partners’ expertise
Dedicated education portal for existing and future investors
9 offices over 5 continents
Focusing on USA, UK, Australia and Africa
Investment Committee invested USD1.34bn in more than 10,800 properties to date
13% + rate of return Invest based on
income-based returns
Investors see returns first
Reduced operational costs
Stable short and long term income
Investors & Members Global Presence Risk Control Stable Return
Expanding user base through strong international presence, variety of interactive events, and existing users’ word-of-mouth advertising
INVESTORS & MEMBERS
Established and constantly expanding relationship network with world-class real estate players to source investment opportunities of the highest quality
REAL ESTATE PARTNERS
How we connect themOUR PLATFORM – Web & Mobile
REGISTER AND VIEW
Provide a verified e-mail address will gain immediate access to
carefully vetted global real estate investment
opportunities
SELECT AN INVESTMENT
Choose an investment that is most suitable
in terms of type, location, investment
amount, risk preference and return
targets
TRANSACT ONLINE
Complete the entire process including legal
document signing online and funds
transfer
MANAGE PORTFOLIO
Access personal investment
dashboard, receive investment updates, tax documents and
review return distributions
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Easy to use and simple to understand portal designed to maximize user experience and satisfaction
How we connect themOUR PLATFORM
GLOBAL PORTFOLIO DASHBOARD V.2
AFRICA & SOUTH AFRICA
SOUTH AFRICAFSBTiming
Conclusion
49% of the world’s wealth is in property!
"To become financially independent you must turn part of your income into capital; turn capital into enterprise; turn enterprise into profit; turn profit into investment; and
turn investment into financial independence."
Jim Rohn
Strategy
Find
FinancePurchase
Manage
Decision
Client
Partners
Wealth Migrate
“Whatever you do, or dream you can, begin it. Boldness has genius, power and magic in it. Begin it now!”
Johann Wolfgang von Goethe
VISION
VISION – “A Family office in everyone’s pocket!”
“Dream big, people become what they dream!”
Questions and Answers