Buying you first investment prop. cash is better if you have the funds. Immediately after that scale with easy through financing. It reduces the dependancy on the owner. The ROI is justified by your time frame, if the bank is going to make R700000 in interest from your bond in 20 years, isn't it better that R700k goes to you? Now that's an ROI
@tbshabalala2707 Thanks so much for sharing. It can definitely be a good ROI. If it's not all your cash, it can definitely work quite well. As long as the deal itself is also a good deal. I always do a 30-year bond and don't stress too much about interest because your tenant will be paying this. There's absolutely nothing wrong with buying cash. It definitely has its advantage. I think most people are not comfortable with highly leveraged portfolios, and cash might just be a better option . 💪🏻💪🏻
My view is that buying property in cash protects you from inflation and you can play with the numbers. In financing your in risk of inflation means high interest. Financing is best if the economy is doing good.
Buying in cash literally takes away ur ability to purchase other properties and scale. Real estate is a business, a business needs to be scalable in order to grow
@@angusm007 exactly, u can literally buy 5 properties with leverage if u put down 20% as a down payment…. Instead of going All Cash on 1 particular property.
Great point. But yes, it forms part of paying interest. Some people are comfortable with debt, and some are not. It really depends on a couple of factors. Thanks for commenting
I definatley do not consider myself a property investor but I would like to share my experience. I started off about 12 years ago purchasing my 1st property ( BOND).. I stayed in the property and after 3 years I sold that property, made roughly around R100k which was then used for my transfer/bond cost for my next property which I got at a good price. We moved in and stayed at this property for about 2 years , sold and made about R400k. This is when I had a light bulb moment. When staying at property 1 and property two my wife and I could not afford to bond another property. What we then decided to do was move in with her Parents which would allow us to then purchase a property ( BOND) and then use the proceeds we had of selling the previous properties to renovate and then resell. We did this for a few years and this then allowed us to buy a house cash. As someone that bought with a BOND I definately prefer CASH. When a agent hears CASH they tend to give you 'preferential' treatment ESPECIALLY if it is desperate buyer or a estate where the property needs to sell. Besides the cost factors the MOST IMPORTANT thing is , you BUILD relationships with agents when buying CASH and they tend to call you you 1st once they have properties available.
Thank you very much for sharing. Certainly sounds like you have made some good moves with property before. You make some great points, and I love that you brought up the fact that you can build good relationships. This is invaluable when it comes to investing in property. Buying cash certainty has some very nice advantages like you mentioned, and it really depends on your age, Risk apetite and goals in mind. Thanks for sharing and for taking the time to watch my videos. All the best
@@louisreynhardt Thanks. I just came across you chanel and will most definately subscribe. Please keep the VIDS coming. Hopefully in future you can show us a Fixer UPPER you have purchased, take us through the costing to renovate and all other other related costs and shows us the end product and what the net margins were.... I am currentl full times employed and hopefully next year I will muster the courage to resign and do this full times. Lastly just for your viewers, it helps to have a good realiable team who does your renovations as it can become a expensive exercise. There are times where ( not all) contractors will run away with your hard earned money, delay because they must take from Paul to pay John. Luckily my dad is my builder and I can save on costs.
Leverage works both ways good and bad. The good is that in magnifies your gains. In down market when no one is willing to pay your current rent you will find that all those properties are under water and you go bankrupt. Managing risk is always an important aspect of using leverage.
True, leverage is like a double-edged sword. Although you should use leverage very carefully, you should also account for these worst-case scenarios like you just mentioned. A good rule of thumb is to have 10% of the property value saved up as reserves.
The pros of buying cash out weight the cons. I agree. Debt can be risky, buying cash less so. On top of that, I really don’t understand (beyond my pay grade 😬) how paying huge interest on money you’ve borrowed to buy the property can be better than paying NO interest whatsoever. How can borrowing money and paying interest outperform ROI on buying cash - in and of itself (in other words from a money perspective only, forget the other cons for the moment)?? Thanks for the great “food for thought” mate!
Thanks for your comment and for sharing your thoughts. I agree 100% that cash has a lot of advantages and can greatly help you propell yourself to success. Using leverage will always result in HIgher ROI when done correctly. (The less cash you use, the higher your return will be). Just remember, some people are so afraid of using debt because of what they learn in school and varsity. Once you understand that debt can be part of your life forever and you dont have to focus on paying it off early just to be debt free, you will understand that using good debt will help you in so many ways . There's nothing wrong with buying cash, but not a lot of South African has R400 000 cash to buy a small property. If they do have the cash, they will only be able to buy one or maybe two. The idea of this video is 'scale' using debt will help you buy 10 properties when done correctly. Thanks for watching, and I hope my reply helps in some way 😊
Cash is King. And cash will always win. Your example was very simple and had basic assumptions. You ignored interest rate changes, and secondly, when calculating ROI you failed to consider the property value might increase or decrease. In the short term buying with leverage might seem attractive but in the long run the interest payments will negatively impact your ROI. If you buying with cash, what’s stopping you from using leverage to buy your 2nd or 3rd property. And yes you forgo opportunity cost since you are investing and you can always use a credit card if you have liquidity issues. And lastly, it easier to scale your property portfolio using cash and some of leverage than solely relying on leverage (an individual might have a average credit score or gross income that won’t allow for qualifying for additional credit). My advice to all: always try to minimise debt (preferably no debt) in your personal life. Only use credit when doing business. If you default on your credit repayments, all you do is just file for bankruptcy and open another business. However, if you mishandle credit in your personal life, it stays in your credit record for forever.
Man the way you broke this down left me with no choice but to subscribe. You are making a lot of sense. It all boils down what type of an investor one is. What I picked is that buying cash is not good if using all of your cash reserves but still plans on acquiring more properties in the future, other than that then buying cash is a good option.
Thanks so much for the feedback and thanks for supporting the channel. You make a great point. It really does depend on your strategy and end goals in mind. Luckily, theres so many ways yo invest in property. Thanks for watching 😁💪🏻
@dilochetty9332 Cash flow, great credit, the right structures, and good deals can help you buy multiple properties even with small affordability. When I started, the banks told me I qualify for R800 000. Now I own millions of rands worth of property. It's not a matter of you cant , its a matter of figure out how you can. Pop me an email if you want to find out how to do this 💪🏻 Louisreynhardt@gmail.com
@louisreynhardt that's great. For the average person, affordability is bottom line..also, it's very risky buying a rental property using bonds..so let's say u have a way of getting multiple bonds on a 30k gross income.. your rental needs to cover your bond, rates, levies, maintenance etc and if your place is not tenanted for 3 months, you already on the slide to financial problems as based on your affordability, you qualify for X, that means, you don't have extra cash to repay another bond on A B n C.. so an example of a 1mil property.. bond repayment 11k.. say you have 4 of these 1mil properties.. bond repayments 45k, your income 30k gross. 26k net...rental on 3 of those 36k.. you stay in 1.. so your net total income is 62k.. bond repayments 45k.. u left with 17k.. from this 17k, you must pay your rates on all 4, 4k, insurances on all 4, 5k, now u have 8k cashflow left..u stil need to pay for,maintenance, your personal bills, car, food, lights, water, security, kids etc etc etc.. personally, I would never advise any1 to go this route.. now what happens during covid? You not working, or you loose your job..it's a disaster scenario..a debt trap for life..Cash is KING.. if you don't have d cash, save..
I've been watching TH-cam videos from American, asking myself is that possible in South Africa 🇿🇦. Now I met someone in SA. I'll follow for more information. You're Channel is very much important.
Debt is bad, getting a home loan can ruin your life if things don't go your way, it's a 20-30 year coinflip. People are delusional, and use the term "the renters pay for it". Wrong you're renting the banks asset to them, they're using and breaking it. People are always super smart and clever until they do it and realize oh damn, im cashflow negative, the area is bad and i didn't account for levies, taxes & maintenance. Yeah now you are paying your loan every month for the next 30 years, congrats, and things get way worse when the house market crashes. Which will happen real soon because banks are giving away money even when they know they can't get it back. They few who do get it right, congrats you're still poor and the bank owns your home, pray the market doesn't crash in the next 20 years, it will. Most people get home loans, they're the same ones recycling the same advice and they're all poor. If you want good financial advice get it from multi-dollar millionaires, not poor people.
Thank you for taking the time to comment. I appreciate your opinion, and there is a lot of truth in what you are saying. Just remember, if you are not confident in investing in property as an asset class, you can definitely invest in something else. Im curious, Have you owned property before? Property is an asset you can buy with leverage to generate cash flow or equity . It's not the asset itself that will make you rich, but what the asset can produce. Just remember that investing will always have risked involved. Thats why so many people are poor because they are afraid of taking calculated risk. My comment is not to convince you that I am rich or that property can make you rich, but to share that the videos are for people who are trying to learn and trying to take risks Thanks again for watching 💪🏻
Thanks Louis - interesting. Personally I hate any kind of debt but you do make good points. Something to consider: always take out an access bond if you do decide to go the loan route and put as much extra money as possible into that. You get a great return and have full access to the extra invested cash.
@@louisreynhardtI like how u put it whn u want it as a business or investment a bond is the best bcz the risk is for the bank bcz the property belongs to them
@nqababarnes4340 Great way of putting it. Im glad that you can understand the concept. You hit the nail on the head. Well done. Thanks for watching 💪🏻💪🏻
i think if one is starting out and has the funds available, then buying the 1st and/or 2nd investment property cash is a great way to generate a healthy cash flow and build a property portfolio to access credit from the banks and lenders to establish the leverage. remember the bank focuses on your cashflow and affordability scale. cash flow + affordability is the deal maker.
Excellent information, Gary. I completely agree. It can build a great foundation when you buy properties cash. Theres a lot of advantages doing it this way. The taxes on income can be a problem, especially if you are a high income earner. I like to use leverage to buy cash flowing properties, which, together with the saved cash within in the right entities will give you greater chances of growing your portfolio. I think a combination of a cash and leveraged portfolio can be great. Also, depending on your goals and where you are in life. Thanks for sharing 👍
@@louisreynhardt 100% agreed but imagine it from this perspective of someone who comes into a windfall of cash, and say that person is maybe unemployed or unemployable (for whatever reasons) - a person without a regular income would need a strong cashflow traffic to demonstrate affordability to the banks and the lenders. Whilst putting the cash away in a high yield interest accounts may give him/her some leverage towards the banks it will not give him advantage in other credit avenues i.e (furniture, reno materials etc) but a showing of high positive cashflow and affordability may open other credit avenues. hence i say buying 1st or 2nd properties cash maybe beneficial to a certain profile of people to build an attractive property investment portfolio to establish cashflow and subsequently show affordability and then leverage.
@garryrock7039, in this example, it only makes sense to put the cash to use. This person would be much better off buying the properties cash. I think it all boils down to personal preference and your own situation. That's why I like property because there are so many different ways and strategies that have worked over the years . Thanks for the insight. I appreciate it 🙏🏻 🙌🏻
What I learned from this video is that, 1. Know what type of investor you are. If you want more properties in less time, then you have to use a bond it will help you to retain your own cash that can be used for other investments but the rent income will be lower than when you bought for cash since you have to pay the bond monthly. If you are comfortable with receiving the rent income cashflow and less concerned with acquiring more properties in less time, you can purchase in cash, but now that it'll take a while for you to break even and buy more properties. However, you will receive higher rent income because you don't have to pay a bond monthly.
Excellent observation. This is the most important part to understand. Leverage will and can always grow a portfolio much quicker. You just need to have the right skills. Most people are quite afraid of debt because of what they learned in school. Thanks for your comment. I hope someone can read it and learn from it 🙌🏻😎
You cannot bond more properties..you can only bond based on your income.. if u earn 30k, u can bond for 900k.. that's it..finish, Klaar.. u wil not get any more bonds after..cheers
@@dilochetty9332 You can use the bond money to invest in another property, say for 600k for example, then you have 3 incomes and are earning more than 30k, itll be closer to like 50-55k per month...not too bad
Very good advice. We have spent 6 months trying to sell a property with no bond and the time delay has become a big problem. So you make sense & the ROI is very interesting too. They should teach this in schools
I think this one depends on your strategy towards investing in property.. You can buy your first property with cash then you have high cash flow per annum.Then use the same cash generated to diversify your portfolio by acquiring additional properties using the cash generated from the property as a leverage towards your debt acquiring process. The bank can even offer you more debt as they can see you have enough cash inflows.. But as I have said it depends on the strategy the investor has ..
Thanks for sharing. You are 100% right. It really depends on your goals and your end destination in mind. The cool thing is that there are so many ways to approach property investing.
What discourages me from buying through banks is a lot of costs that will reduce the rental income. Rates, Mortgage, Levies etc and these costs sometimes are equal to the rent you receive from the tenant. now you have all these properties you are not getting any meaningful monthly income from. Even hard cash saved in the bank sometimes gives you a better interest income
Thanks for sharing. You are right. Saving in the bank can sometimes beat rental yields. But the power of leverage is a great way to grow your portfolio much quicker. With cash purchases, you still need to pay levies and rates and insurance, etc. Either way, it depends on your risk apetite, and you should do it the way you prefer. Thanks for watching 🙌🏻🙌🏻
I most certainly agree with your opinion. The word 'debt' has been misused for centuries. Instead of it being a catalyst to achieving financial freedom, people perceive it as a no entry zone. At the end of the day, debt is money🤷♂. That's how banks make money(by issuing debt).
Gold doubles every five years. Don't buy commemorative coins, as its hard to find a good buyer, and each coin has a bulky round-topped box and certificate, which l imagine must be included in the sale. Krugerrand does it for me. No frills.
Good day Louis, thank you for the videos. Could I please ask how to obtain a copy of your excel sheet. You mentioned in another video that we can email you but I do not see an email adres and may just be looking past it.
Thanks for watching 😁 I have a property course with a mentoring option Check out this link To secure your spot, simply click payhip.com/LouisReynhardt and follow the easy registration process
Thanks for watching. When you are the buyer with private sales, just make sure you set up the OTP to benefit yourself. Always understand the motive of the seller and make sure that you are buying a good deal. A inspection clause is also a good idea 💡
Live is really hard for me cash or rent is difficult if there are no work and disability and helping big family not easy for one person working RDP House is all that I can buy to help my family then try so save the disabled family and look for work to helping 4 familys this is hard talk.. thanks for the video
Sorry to hear my friend but dont give up. Always keep hustling. Dont compare yourself to anyone and just keep dreaming and putting in the work. Goodluck my friend 🙏🏻
The bottom line is always that cash is *never* interest free. There is *always* an opportunity cost because that cash would have been stored/applied somewhere else where it earns a return of some kind, instead of invested in whatever you’re buying. No one smart keeps cash simply floating around without earning a return.
This was a great way to explain it. You made some excellent points, and it's hard to ignore the fact that leverage is a great way to build wealth. I believe your comment will help many viewers and subscribers. Thanks for sharing 👊🏻
Thanks so much for your positive feedback. It's hard to say, but generally, Western Cape has done very well in appreciation, but overall struggle with Cash flow Other cites like JHB or BFN do well with cash flow and have okay appreciation. You can use a platform like TPN y To track sales and price comps
Another pro by having a bond instead of buying with cash is that you can have insurance on the bond. If you happen to pass away the bond is paid in full and your family will not have to be in debt or have to worry about paying the bond.
@marcotaylor-poverello927 If you live in the property and it's your primary residence, it can make sense to pay cash or to settle the debt earlier. But using gearing with investment properties is a no-brainer for those who understand property investiong.
@@louisreynhardt I'd have to disagree. If you have the money then buy the property and rent it out. I don't see how getting a bond on a place and then renting is profitable. Say you find a R1.5m place, the bond repayments without a deposit would be around 16k, that is excluding rates and taxes and levies (unless you got a free-standing house). Let's be conservative and say that's an extra 2k. You're now paying 18k every month and you're definitely not getting more than 13k rent on a R1.5m property. So you're losing 5k every month, on top of that the interest rate has only been going up. We have not even factored in that tenants have complete control, it's almost impossible to evict someone. So you could potentially have someone living in your property, having not paid rent for months and you're unable to evict them. I have friends who have gone through this. The only way it makes sense to invest in property is if you buy a house that has subdivided land and you're able to rent out to 3 or more separate people. But in general property investing in South Africa through a bond is not smart at all, you're in a country where the wage to living cost is so disproportionate, people struggle to find good tenants who can actually afford their rent. So unless I am missing something I don't see how investing in property through a bond that ties you down for 20-30 years is a good idea in a country where everything is falling apart rapidly.
@marcotaylor-poverello927 You make some good points. But you are missing the fact that leverage actually protects you against everything you just mentioned. If you invest your cash in whatever deal. That money is illiquid. You still have expenses, whether it's cash or not. But now, when something happens, your money is tied down in the deal. The video I made explains exactly why you should not invest in the property you describe. Those are bad investments and will cost you money every month. You need to look for cash flow and equity. Your multi let option is a great way to cash flow, still have all you cash in your bank account , controlling an asset, and paying little to no tax. If you buy cash, you dont have access to the Cash unless you refinance, you will still have the same amount of vacancy or delinquency risk, and you will pay tax in your profit. You will also be able to buy 1 or 2 properties cash a year depeding on your income where with leverage you will be able to buy many more property and STILL have access to your cash. I would suggest reading the book rich dad poor dad cash flow quadrant or consider buying my course to understand all the benefits. Im not trying to convince you to use leverage because it also has disadvantages. That's the cool part about property. You should do it the way that works for you. If that's buying cash, then go for it. The rich use debt to acquire assets that generate cash flow and increase equity, and pay no taxes. It's as simple as that. Although only a small portion of people understand this.
Over a long term period depending how many years the bond is. You end up paying double the amount. Interest usually is the same amount as the installments. My opinion is to pay atleast 50 percent down-payment. Dont let Interest grow. Unless you do plan on selling within a year. If its long term, then this video makes sense over 20 plus years
Thanks for sharing . You make some good points. Using 50% deposit can greatly help you in the future with reducing interest and generating more cash flow. Thanks for your insight. All the best 👊🏻
Hey Louis, I love your content! Definitely my favorite local TH-camr! I wanted to know if it would be possible for you to show us your portfolio of the houses you have obtained thus far and income you generate from them vs the amount of debt you have undertaken
Thanks a lot, my friend. I appreciate the positive feedback. I'm glad to hear that my channel can provide value. This is a great suggestion, but unfortunately, due to privacy and security reasons, I won't be sharing too much detail of my whole portfolio . Here and there, I share some real-life numbers but will gladly share more about the type of properties that I buy. Thanks again.
For the return on investment from the cash purchase, you should deduct the ‘interest that would have been earned’ on the cash as an expense to get a fair comparison. If you bought a house with a 100% bond (Option 1) you would still be earning interest on your cash and should add to your income and increase your ROI.
Would it not make sense to buy a property cash so that you can use it as surity to purchase a second ? Also, If the first property was purchased and some equity was achieved. Wouldn't It will allow you to take a bigger loan to buy the 2nd property ? You then ultimately have rent from two properties servicing the loan on the 2nd property.
You can definitely follow that route, but you will have to consider your taxes on those rental incomes. There's no wrong or right. You'll have to do what works for you. If you can afford buying cash, it certainly makes sense to have some paid properties. It also depends on your end goals in mind . Thanks for commenting 👊🏻🙌🏻
Thanks Louis for the great content. Like you, I prefer leveraging my investment property, it just makes sense for so many reasons. The mistake I often see people make is taking out a 100% bond to finance an overpriced property that is cash-flow negative. The problem becomes compounded when you can’t find a tenant for 3-4 months and financial distress begins setting in. So, leverage is a double-edged sword, it can work for you or work against you. You just need to know what you’re doing.
Thank you for sharing. I agree that there are many advantages to using leverage correctly, but it is indeed a double-edged sword. Having adequate reserves is very important to reduce the risks of vacancies. I work on 10% of the value of the property for every property I own. I have also seen 100% finance deals that went south. There is a place for loss-making properties in a portfolio to reduce taxes, but managing these is very important. Thank you for your insight. Appreciate it 🙏🏻
Hey Louis, I wanted to know have you ever tried flipping houses? I wanted to know if it's a good idea or if it's best to hold on to the house and just rent it out
I dont do flipping because this defeats the point of owning a long-term asset and creating generational wealth. I have no problem with the strategy. I just choose not to use it. I want to use property as an investment for the long term and not for short-term profit. Why sell the goose that lays the golden eggs.
The savings alone won't allow you to take on debt. It's a combination of your income and affordability and credit score along with your disposable income, like savings or investments that you can borrow on.
Make sure you work with trustworthy team members. This is something I cover in my property course. You will use an attorney to complete the transfer process so there are still legal steps to follow.
Focus on midlle to low income housing. Anywhere else but CT. The Ct property market is focused on appreciation only. You won't find cash flow properties unless you do multi lets
Hi Louie, I came across with you blog i found it very helpful. Could you please share with me your spreadsheet. Thank you and more power. Paul Arnold Vancouver BC Canada
I lived in a Country where income on property was frowned upon... instead people would offer services and goods as a source of income... the standard of living was way higher.
Great question Mary. It depends on whether it's for an investment property or a primary residence? I will consider private equity for an investment property when im older. Cash might be an option for a primary residence(if it's not all your cash), and you can always try to refinance a portion of the property even though you are older than 65. The banks can only say yes or no. You can use cash for investments when you have a good enough cash flow. You can use it to fund the next deal. It will just be a bit of a slower process.
Generally, you can compare the ROI that you can receive from a bank( which is tyypically considered a safe investment ) the bank can yield 5%-11% depending on what type you use and the amount of money you have available. I look for 15% Roi on properties or properties with large equity available.
I dont have much experience in developments, but it is definitely a more advanced property strategy. I personally like to keep things simple and rinse and repeat 💪🏻
How do you work out what is an appropriate rate to charge rent and how do you calculate all your expenses? Also if I may ask, how many properties do you manage/own?
I would say market research and knowing your areas You can use property 24 to search for similar properties and see what they are renting for and if they are struggling to rent them. Agents can be a great help too. It's also experience and trial and error. You can use platforms like TPN that are highly data driven and can help you make accurate assumptions. I think the main thing is to do a lot of research and to understand your market. I would prefer not to disclose my portfolio . Thanks again for watching, and thank you for your comment. 💪🏻
@@louisreynhardt Thank you for taking time out of your busy day at this time of night to respond. Thank you for your advice. I respect your decision to keep your details on your portfolio to yourself. The reason I am asking is because how do you manage vast amounts of property like a champ?
@Mark71697 pleasure my friend. Some of the properties I manage myself and some I use reliable agents. The management is really not that time-consuming. The difficult part is always finding a good tenant and vetting them. The management should basicly be collecting rent.
@@Mark71697 My parents had wealthy friends who owned I think 30 or 40 million in properties (excluding the law firm the wife owned and the construction company husband owned) They either manage the property themselves or they hire someone to manage it all, for them their holiday homes they did themselves but the other properties was managed by someone else
Something like a Standard bank money market account. Yields around 8.75% right now, depending on the funds you have in it . Absa, FNB and Nedbank have their own versions of this. 💪🏻
Thanks for sharing. It makes 100% sense. Theres many advantages to buying cash. I like the negotiation power that comes with it, and the majority of the time, you can get deals for a lot cheaper. 💪🏻
Cash is King. And cash will always win. Your example was very simple and had basic assumptions. You ignored interest rate changes, and secondly, when calculating ROI you failed to consider the property value might increase or decrease. In the short term buying with leverage might seem attractive but in the long run the interest payments will negatively impact your ROI. If you buying with cash, what’s stopping you from using leverage to buy your 2nd or 3rd property. And yes you forgo opportunity cost since you are investing and you can always use a credit card, or get a secured loan using the property you purchased with cash to obtain lower rates, if you have liquidity issues. And lastly, it easier to scale your property portfolio using cash and some form of leverage than solely relying on leverage (an individual might have a average credit score or gross income that won’t allow for qualifying for additional credit). My advice to all: always try to minimise debt (preferably no debt) in your personal life. Only use credit when doing business. If you default on your credit repayments, all you do is just file for bankruptcy and open another business. However, if you mishandle credit in your personal life, it stays on your credit record for forever.
Great information, Victor. You make some excellent points. Cash has many advantages and can work well for some people. The video was made to show the difference between the two and what I prefer, not what's the best for every single person.. Cash can be a smart move, but many people dont have the funds to buy property cash. (Majority of South africans) Leverage certainly has some risk, but cash also has risk. Some of the largest ones are taxes. But again, this video was simply made to show that your ROI on leverage will ALWAYS be higher than cash because you have little or none of your own money in the deal. If i use the banks money and I go bankrupt, I still have my liquid assets such as cash safely stored away. If you buy property cash, it can be attached. Although I rarely consider putting down cash. As you can see in the comments, many people prefer cash, and some prefer leverage. That's the cool thing about property. You can invest in it in the way that you prefer. Thanks for sharing your thoughts. All the best
i understand what you are saying,but if u are on pension you do not have a working monthly income, so im sure no bank in SA will give u a bond to buy the property, because how are you going to pay back the bond, and even if you earn a pension no bank allows you a bond
You can always focus on private equity or angel investors but Buying cash is not wrong at all. It all depends on what you are trying to achieve, your goals, and where you are in your life. You can always use a large deposit and finance part of it and use bond insurance to reduce the risk for the bank 🏦 😉
So I have this saved on TH-cam. And there's a song saved before this video which I constantly listen to. Everytime it ends, this video starts and I laugh everytime I hear.. "Whatsup LOUIS, it's GUYS here." 😂
@another_coding_channel_argh sure, so if you pay cash, there wil be no bond (your bond has a principal payment part aswell as a interest payment part) the interest can be deducted to reduce your tax but if you buy cash and dont have a bond you dont have interest to deduct meaning your taxes will be more. Hope this answers your question.
Hi Louis, can you do another example on your spreadsheet with tax implications? That way, people can see how much tax they will have to pay to SARS if they don’t leverage vs leveraging.
Yes, please. I also don’t understand the tax benefit you mentioned in the video. I feel like I have missed out somehow. Please can you do a video on this 🙏🏼
High ROI with low liquidity puts you in a long position, yet low ROI with high liquidity makes you to be able to short the position. It really depends on the person’s investment strategy.
It can make sense to buy your residence cash if you have more cash around. I will never use my only money to buy a property. It's way too risky. Theres certain ways to work around the risks, but it is generally not a good idea to invest all your money in one asset class.
@louisreynhardt I just want to stress this is informal not real financial advice. 😆. For legal reasons. I think the general rule of thumb is to maintain an emergency liquid cash fund, and if you have excess, then it's a decent idea? Decrease your interest costs etc. 7-10 year timelines etc.
@Strngbd No stress my friend. Look, everything has its positive and negative sides. You need to understand your goals and vission to determine what will work for you. Even though I can buy properties cash, I will always use leverage because that works for me. And I guess that's the awesome thing about property. You made some very valid points, and I hope that someone will notice your comment. Thanks again for watching 😎😁👊🏻
Louis, consider this: if someone loses their job after paying a 20-year bond for 10 years with monthly payments of about R5 000 (R5000x12x10 years = R600 000 loss), what's the real benefit of having a bond over buying the property outright if you have the cash? People often aim to pay off their bond quickly to minimise interest payments and reduce the risk of foreclosure if they can't make payments in the future. If someone buys a property in cash, they'll still own the property even if they lose their job, while those with a bond risk the bank auctioning off the property at a lower price if they can't keep up with payments. So, who truly benefits in this situation? (This is South Africa where companies cut employees daily with less chance of securing another job in a short period of time). This is my two cents.
Thanks for sharing. You make some great points. There is no wrong or right. You need to do what works for you. I just share my approach to educate where I can. Buying cash can be very lucrative. I would just suggest not having all your cash in your property because you can still run into problems and fall behind on maintenance, repairs, Rates and taxes, insurance water bills, security etc. So if you buy cash, make sure you have separate cash reserves available. Hope this makes sense. Again stick with your gut and do what works for you.
Hi Louis! Enjoying your content. How much do you think you should put down when using leverage. And why? Also when using leverage do you try to pay off the debt sooner or do you pay it off for the duration of the term? Would love to know what your portfolio consists of. Thanks Louis!
I have separate entities with different strategies. But a large portion of my portfolio is heavy leveraged, where I usually take out 100% loans and only pay around 10% deposit when the bank won't grant me a 100% loan. I would say for most people a 20% deposit would be great because you save a lot of interest and your monthly payments will be much less.( with that said not everyone can afford it, especially new investors or low to mid income earners) I do not try to pay off properties sooner because I am still young. I have time on my side. I have had multiple opportunities to settle the debt on my properties, but that just doesn't form a part of my long-term goals and strategies. Just remember that it is different for everyone and you need to do what works for you 💪🏻💪🏻 Hopes this answers your question
Because there is only one advantage to buying in your own name : its easy to do so. Buying in a different structure gives you tax advantage, asset protection, growth potential, and estate planning
This is assuming you can get a loan, not to mention multiple loans. As a business owner (with a turnover of +/- R10 million per annum) I can tell you it's not easy, if at all (even with a perfect credit history) because I am considered as a "high risk individual".
If you have R100m turnover and can't get a bank loan, something is seriously wrong. Banks want to see cash flow. Revenue means nothing if OPEX is more than revenue . Im.sure you should be able to sort this out with some specialized guidance. Thanks for sharing. All the best
@@louisreynhardt It's not 100, it's 10. Yes, you can lie but that is FRAUD. Ever since the collapse, & more so Covid, the banks are extremely cautious. The only way I could get any loan was an overdraught on my business account & that was only enough for an undeveloped plot. In the end I put my business up for sale & that was also a nightmare coz the banks wanted buyers to put down three quarters of R 3 million deposit. This was even for other franchisees with 10 years track record. Long story short it took two & a half years to sell. I have now started two other businesses (with cash) & I have started to build my house (with cash). I will never make debt in my life again coz as they say, sh!t happens, things can (& have) changed over night.
But within 3 years you can have 150k with your can invest in buying of land or invest with mutual fund..with a bond repo rate increase has a negative infact
Interest rates sure have a negative effect on your investment. Unless it actually goes down. Maybe it will go down in the second quarter of 2024. Land is also a good investment if you can grow crops or utilize livestock.
Yes, you can. Remember, if you generate cash flow, then your tenants pays the interest and not you. Although, you are liable for the interest as long as you have a tenant that keeps paying you, you dont have to worry about all the interest
Yes, technically you can withdraw the money to pay for the property cash, but the high interest on the credit cards is going to kill you. What is your current credit card interest , do you know? Bank financing is much simpler and less risky
@@louisreynhardt Wasn’t thinking of making a cash advance, cz I understand the interest would be merciless. Jus a normal credit card transaction for this property purchase not “withdrawing” it. I’ll use half cash and then other remaining balance on credit card(s). I was thinking for the credit card(s) I would just be working as usual and paying off the balance monthly, from my paycheck and the newly bought property would on the side giving me monthly income. What do you say? I have 28.49% for purchase APR And 29.99% for for cash advance APR.
@storeroom1503 I would suggest using full bank finance. If you borrow money in any way from a credit card, the interest is very high. You can borrow at 12% from the bank. This is a much cheaper option.
Thanks for your comment. No, it's not a bad Idea its just not the best way to grow a portfolio. I'm not sure who is charging you 20% interest, but you should run away. Buying cash, like you know, has many advantages like I mentioned in the video.
Absolutely, it's true in some cases. I choose not to pay cash. Hence, the pros and cons. Most South Africans can't afford it unfortunately, thats why Leverage is such a great tool.
This hit home for me....Financial institutions can only give me 50% bond approval since I am not a citizen. For all properties I purchased so far I had to put a 50% upfront deposit, I use accumulated equity for the deposit and I simply repeat the process on scaling.
Great stuff. Its smart to use your equity when they dont want to give you 100% finance. You are basically beating them at their own game. Thanks for sharing . All the best 💪🏻
Would you guys buy property cash ?
Buying you first investment prop. cash is better if you have the funds. Immediately after that scale with easy through financing. It reduces the dependancy on the owner.
The ROI is justified by your time frame, if the bank is going to make R700000 in interest from your bond in 20 years, isn't it better that R700k goes to you? Now that's an ROI
@tbshabalala2707 Thanks so much for sharing. It can definitely be a good ROI.
If it's not all your cash, it can definitely work quite well. As long as the deal itself is also a good deal.
I always do a 30-year bond and don't stress too much about interest because your tenant will be paying this.
There's absolutely nothing wrong with buying cash. It definitely has its advantage. I think most people are not comfortable with highly leveraged portfolios, and cash might just be a better option . 💪🏻💪🏻
Yes. I always advise people to buy for cash and then refinance later to pull their money out.
@musawenkosimakhoba9028 Great tip my friend. Combining cash with leverage is very smart. Thanks for sharing 💪🏻
My view is that buying property in cash protects you from inflation and you can play with the numbers. In financing your in risk of inflation means high interest. Financing is best if the economy is doing good.
Great to see a decent South african channel covering these topics. Keep up the great work
Thank you my friend. Hard at work and trying to give back as much as I can. Thanks for supporting the channel 🙌🏻 🙏🏻
It all depends on WHAT propperty it is. The pros of buying cash GREATLY outweigh the cons.
I agree. The deal can make or break you. Whether it's cash or not, if it's not the right property, it won't make sense.
Buying in cash literally takes away ur ability to purchase other properties and scale.
Real estate is a business, a business needs to be scalable in order to grow
Not necessarily, like what was said its all about opportunity cost, the cash couldve yield a better return elsewhere.
@@angusm007 exactly, u can literally buy 5 properties with leverage if u put down 20% as a down payment…. Instead of going All Cash on 1 particular property.
@@siphileandilesibiya8980 not true
With all the Rand manipulation reports recently, I would definitely buy in cash.
Thanks for sharing. Theres alot going on in the market.😢😜
Or rather keep your cash in foreign currency
Great tip 👊🏻🤑
Whats up Louis its guys here 😂 the opening line killed me. I like your educating content mate.
Thanks a lot my friend. I appreciate it. I'm glad you like the catchy intro 😁😁
You left out the worst con of a bond with is paying 3 to 4times the price due to interest 😝
Great point. But yes, it forms part of paying interest. Some people are comfortable with debt, and some are not. It really depends on a couple of factors. Thanks for commenting
I'm not sold on debt. Cash is king.
Thanks for sharing 👊🏻
I definatley do not consider myself a property investor but I would like to share my experience. I started off about 12 years ago purchasing my 1st property ( BOND).. I stayed in the property and after 3 years I sold that property, made roughly around R100k which was then used for my transfer/bond cost for my next property which I got at a good price. We moved in and stayed at this property for about 2 years , sold and made about R400k. This is when I had a light bulb moment. When staying at property 1 and property two my wife and I could not afford to bond another property. What we then decided to do was move in with her Parents which would allow us to then purchase a property ( BOND) and then use the proceeds we had of selling the previous properties to renovate and then resell. We did this for a few years and this then allowed us to buy a house cash. As someone that bought with a BOND I definately prefer CASH. When a agent hears CASH they tend to give you 'preferential' treatment ESPECIALLY if it is desperate buyer or a estate where the property needs to sell. Besides the cost factors the MOST IMPORTANT thing is , you BUILD relationships with agents when buying CASH and they tend to call you you 1st once they have properties available.
Thank you very much for sharing. Certainly sounds like you have made some good moves with property before.
You make some great points, and I love that you brought up the fact that you can build good relationships. This is invaluable when it comes to investing in property. Buying cash certainty has some very nice advantages like you mentioned, and it really depends on your age, Risk apetite and goals in mind. Thanks for sharing and for taking the time to watch my videos.
All the best
@@louisreynhardt Thanks. I just came across you chanel and will most definately subscribe. Please keep the VIDS coming. Hopefully in future you can show us a Fixer UPPER you have purchased, take us through the costing to renovate and all other other related costs and shows us the end product and what the net margins were.... I am currentl full times employed and hopefully next year I will muster the courage to resign and do this full times. Lastly just for your viewers, it helps to have a good realiable team who does your renovations as it can become a expensive exercise. There are times where ( not all) contractors will run away with your hard earned money, delay because they must take from Paul to pay John. Luckily my dad is my builder and I can save on costs.
"Whats up Louis, its guys here..." i loved that🤣
Wonderful insight. Thank you
Thanks buddy appreciate it 🙏🏻 🙌🏻
I literally found myself clapping hands for this content mate. Thanks.. Please please share your spreadsheet,
Thanks for the comment man appreciate it 💪🏻💪🏻 pop me an email at louisreynhardt@gmail.com
Leverage works both ways good and bad. The good is that in magnifies your gains. In down market when no one is willing to pay your current rent you will find that all those properties are under water and you go bankrupt. Managing risk is always an important aspect of using leverage.
True, leverage is like a double-edged sword.
Although you should use leverage very carefully, you should also account for these worst-case scenarios like you just mentioned. A good rule of thumb is to have 10% of the property value saved up as reserves.
The pros of buying cash out weight the cons. I agree. Debt can be risky, buying cash less so. On top of that, I really don’t understand (beyond my pay grade 😬) how paying huge interest on money you’ve borrowed to buy the property can be better than paying NO interest whatsoever. How can borrowing money and paying interest outperform ROI on buying cash - in and of itself (in other words from a money perspective only, forget the other cons for the moment)??
Thanks for the great “food for thought” mate!
Thanks for your comment and for sharing your thoughts. I agree 100% that cash has a lot of advantages and can greatly help you propell yourself to success.
Using leverage will always result in HIgher ROI when done correctly. (The less cash you use, the higher your return will be). Just remember, some people are so afraid of using debt because of what they learn in school and varsity. Once you understand that debt can be part of your life forever and you dont have to focus on paying it off early just to be debt free, you will understand that using good debt will help you in so many ways .
There's nothing wrong with buying cash, but not a lot of South African has R400 000 cash to buy a small property. If they do have the cash, they will only be able to buy one or maybe two.
The idea of this video is 'scale' using debt will help you buy 10 properties when done correctly.
Thanks for watching, and I hope my reply helps in some way 😊
Cash is King. And cash will always win. Your example was very simple and had basic assumptions. You ignored interest rate changes, and secondly, when calculating ROI you failed to consider the property value might increase or decrease. In the short term buying with leverage might seem attractive but in the long run the interest payments will negatively impact your ROI. If you buying with cash, what’s stopping you from using leverage to buy your 2nd or 3rd property. And yes you forgo opportunity cost since you are investing and you can always use a credit card if you have liquidity issues. And lastly, it easier to scale your property portfolio using cash and some of leverage than solely relying on leverage (an individual might have a average credit score or gross income that won’t allow for qualifying for additional credit).
My advice to all: always try to minimise debt (preferably no debt) in your personal life. Only use credit when doing business. If you default on your credit repayments, all you do is just file for bankruptcy and open another business. However, if you mishandle credit in your personal life, it stays in your credit record for forever.
What if you buy a house in cash in cape town and then rent it through airbnb would that give you a profitable return if done right ?
Man the way you broke this down left me with no choice but to subscribe. You are making a lot of sense. It all boils down what type of an investor one is. What I picked is that buying cash is not good if using all of your cash reserves but still plans on acquiring more properties in the future, other than that then buying cash is a good option.
Thanks so much for the feedback and thanks for supporting the channel. You make a great point. It really does depend on your strategy and end goals in mind. Luckily, theres so many ways yo invest in property. Thanks for watching 😁💪🏻
How would taking a bond allow you to buy more properties ? If u earn 35k, you qualify for a 1m bond.. thats it.. you cannot bond anymore properties..
@dilochetty9332 Cash flow, great credit, the right structures, and good deals can help you buy multiple properties even with small affordability. When I started, the banks told me I qualify for R800 000. Now I own millions of rands worth of property. It's not a matter of you cant , its a matter of figure out how you can. Pop me an email if you want to find out how to do this 💪🏻
Louisreynhardt@gmail.com
@louisreynhardt that's great. For the average person, affordability is bottom line..also, it's very risky buying a rental property using bonds..so let's say u have a way of getting multiple bonds on a 30k gross income.. your rental needs to cover your bond, rates, levies, maintenance etc and if your place is not tenanted for 3 months, you already on the slide to financial problems as based on your affordability, you qualify for X, that means, you don't have extra cash to repay another bond on A B n C.. so an example of a 1mil property.. bond repayment 11k.. say you have 4 of these 1mil properties.. bond repayments 45k, your income 30k gross. 26k net...rental on 3 of those 36k.. you stay in 1.. so your net total income is 62k.. bond repayments 45k.. u left with 17k.. from this 17k, you must pay your rates on all 4, 4k, insurances on all 4, 5k, now u have 8k cashflow left..u stil need to pay for,maintenance, your personal bills, car, food, lights, water, security, kids etc etc etc.. personally, I would never advise any1 to go this route.. now what happens during covid? You not working, or you loose your job..it's a disaster scenario..a debt trap for life..Cash is KING.. if you don't have d cash, save..
I've been watching TH-cam videos from American, asking myself is that possible in South Africa 🇿🇦. Now I met someone in SA. I'll follow for more information. You're Channel is very much important.
Thanks for watching, and welcome to the channel. Make sure to watch the videos in my "real estate" playlist. Im sure you will learn a lot 👊🏻.
Debt is bad, getting a home loan can ruin your life if things don't go your way, it's a 20-30 year coinflip. People are delusional, and use the term "the renters pay for it". Wrong you're renting the banks asset to them, they're using and breaking it. People are always super smart and clever until they do it and realize oh damn, im cashflow negative, the area is bad and i didn't account for levies, taxes & maintenance. Yeah now you are paying your loan every month for the next 30 years, congrats, and things get way worse when the house market crashes. Which will happen real soon because banks are giving away money even when they know they can't get it back. They few who do get it right, congrats you're still poor and the bank owns your home, pray the market doesn't crash in the next 20 years, it will.
Most people get home loans, they're the same ones recycling the same advice and they're all poor. If you want good financial advice get it from multi-dollar millionaires, not poor people.
Thank you for taking the time to comment. I appreciate your opinion, and there is a lot of truth in what you are saying. Just remember, if you are not confident in investing in property as an asset class, you can definitely invest in something else. Im curious, Have you owned property before?
Property is an asset you can buy with leverage to generate cash flow or equity . It's not the asset itself that will make you rich, but what the asset can produce.
Just remember that investing will always have risked involved. Thats why so many people are poor because they are afraid of taking calculated risk. My comment is not to convince you that I am rich or that property can make you rich, but to share that the videos are for people who are trying to learn and trying to take risks
Thanks again for watching 💪🏻
Thanks Louis - interesting. Personally I hate any kind of debt but you do make good points. Something to consider: always take out an access bond if you do decide to go the loan route and put as much extra money as possible into that. You get a great return and have full access to the extra invested cash.
Thanks for sharing. The Access bond is a great tool to utilize when it comes to investing. Thanks for watching 👊🏻 😎
@@louisreynhardtI like how u put it whn u want it as a business or investment a bond is the best bcz the risk is for the bank bcz the property belongs to them
@nqababarnes4340 Great way of putting it. Im glad that you can understand the concept. You hit the nail on the head. Well done. Thanks for watching 💪🏻💪🏻
i think if one is starting out and has the funds available, then buying the 1st and/or 2nd investment property cash is a great way to generate a healthy cash flow and build a property portfolio to access credit from the banks and lenders to establish the leverage. remember the bank focuses on your cashflow and affordability scale. cash flow + affordability is the deal maker.
Excellent information, Gary. I completely agree. It can build a great foundation when you buy properties cash. Theres a lot of advantages doing it this way.
The taxes on income can be a problem, especially if you are a high income earner.
I like to use leverage to buy cash flowing properties, which, together with the saved cash within in the right entities will give you greater chances of growing your portfolio. I think a combination of a cash and leveraged portfolio can be great. Also, depending on your goals and where you are in life. Thanks for sharing 👍
@@louisreynhardt 100% agreed but imagine it from this perspective of someone who comes into a windfall of cash, and say that person is maybe unemployed or unemployable (for whatever reasons) - a person without a regular income would need a strong cashflow traffic to demonstrate affordability to the banks and the lenders. Whilst putting the cash away in a high yield interest accounts may give him/her some leverage towards the banks it will not give him advantage in other credit avenues i.e (furniture, reno materials etc) but a showing of high positive cashflow and affordability may open other credit avenues. hence i say buying 1st or 2nd properties cash maybe beneficial to a certain profile of people to build an attractive property investment portfolio to establish cashflow and subsequently show affordability and then leverage.
@garryrock7039, in this example, it only makes sense to put the cash to use. This person would be much better off buying the properties cash. I think it all boils down to personal preference and your own situation. That's why I like property because there are so many different ways and strategies that have worked over the years . Thanks for the insight. I appreciate it 🙏🏻 🙌🏻
Your content is ncaaaa!!! 👌👌👌
Suitable to watch first thing in the morning to start off the day.
Thanks man, appreciate the comment. Hope you enjoy it . 💪🏻💪🏻
What I learned from this video is that,
1. Know what type of investor you are.
If you want more properties in less time, then you have to use a bond it will help you to retain your own cash that can be used for other investments but the rent income will be lower than when you bought for cash since you have to pay the bond monthly.
If you are comfortable with receiving the rent income cashflow and less concerned with acquiring more properties in less time, you can purchase in cash, but now that it'll take a while for you to break even and buy more properties. However, you will receive higher rent income because you don't have to pay a bond monthly.
Excellent observation. This is the most important part to understand. Leverage will and can always grow a portfolio much quicker. You just need to have the right skills. Most people are quite afraid of debt because of what they learned in school. Thanks for your comment. I hope someone can read it and learn from it 🙌🏻😎
You cannot bond more properties..you can only bond based on your income.. if u earn 30k, u can bond for 900k.. that's it..finish, Klaar.. u wil not get any more bonds after..cheers
@@dilochetty9332 You can use the bond money to invest in another property, say for 600k for example, then you have 3 incomes and are earning more than 30k, itll be closer to like 50-55k per month...not too bad
To buy properties cash you need a cash cow business that generate income quickly and store it in properties, it works for me.
Very good advice. We have spent 6 months trying to sell a property with no bond and the time delay has become a big problem. So you make sense & the ROI is very interesting too.
They should teach this in schools
Sorry to hear. Hope you can sell it soon. Thanks for your comment and for supporting the channel. 💪🏻
I think this one depends on your strategy towards investing in property..
You can buy your first property with cash then you have high cash flow per annum.Then use the same cash generated to diversify your portfolio by acquiring additional properties using the cash generated from the property as a leverage towards your debt acquiring process. The bank can even offer you more debt as they can see you have enough cash inflows..
But as I have said it depends on the strategy the investor has ..
Thanks for sharing. You are 100% right. It really depends on your goals and your end destination in mind. The cool thing is that there are so many ways to approach property investing.
What's up Louis its guys here.... Love it.
Thanks brother, its catchy hay 😁🤣
Hahah love the intro, “what’s up Louie, guys here”. 😂😂😂😂
Thanks my friend 😄💪🏻💪🏻
I came looking for this comment to make sure I heard the right thing lmfao
Great advice. Thank you for sharing. 👍🏽
Appreciate the support 🙏🏻
What discourages me from buying through banks is a lot of costs that will reduce the rental income. Rates, Mortgage, Levies etc and these costs sometimes are equal to the rent you receive from the tenant. now you have all these properties you are not getting any meaningful monthly income from. Even hard cash saved in the bank sometimes gives you a better interest income
Thanks for sharing. You are right. Saving in the bank can sometimes beat rental yields. But the power of leverage is a great way to grow your portfolio much quicker. With cash purchases, you still need to pay levies and rates and insurance, etc. Either way, it depends on your risk apetite, and you should do it the way you prefer. Thanks for watching 🙌🏻🙌🏻
The intro.. "what's up Louis it's guys here" great content and quite a funny intro
Thanks my friend. Appreciate the feedback. Welcome to the channel 😀 😄
Asset to debt ratio is less healthier when uding debt. But all depends on what your aim is, really.
Good, simple, straight-forward content.
Thanks for your input and for the positive feedback. Appreciate it 🙏🏻 😁🙌🏻
I most certainly agree with your opinion. The word 'debt' has been misused for centuries. Instead of it being a catalyst to achieving financial freedom, people perceive it as a no entry zone. At the end of the day, debt is money🤷♂. That's how banks make money(by issuing debt).
Exactly, tou hit the nail on the head. Thanks for sharing bud. Appreciate it . All the best
Cash is King 👌🏾
Yeaaah Buddy 💪🏻💪🏻💪🏻
Love the information ❤
Thanks for watching and for the possitve feedback 🙏🏻
First time here, wow very impressive. If possible, l would like you to do a clip on how to get to real estate business pros and cons
Thanks for watching, and welcome to the channel💪🏻. Have a look at my real estate playlist on the channel. There will be videos that can help a lot.
You just gained a subbie 😊thank you for this information.
Welcome, welcome. Thanks for supporting the channel. 😉😁🙌🏻
Such good content! Made me think outside the box since I started following your channel. Please keep up the good work!👏
Thanks so much for your positive comment. I'm glad it can help in some way. 💪🏻💪🏻
"Whats up Louis, its guys here" 😂 I appreciate your content bru and that intro made me laugh. Cheers!
Thanks my friend. Glad it can help
Thanks for watching 💪🏻😜
Gold doubles every five years. Don't buy commemorative coins, as its hard to find a good buyer, and each coin has a bulky round-topped box and certificate, which l imagine must be included in the sale. Krugerrand does it for me. No frills.
Wow..this is so informative....Great content....
Thanks so much for watching 👏🏻💪🏻
Good day Louis, thank you for the videos. Could I please ask how to obtain a copy of your excel sheet. You mentioned in another video that we can email you but I do not see an email adres and may just be looking past it.
Sure, you can pop me an email at louisreynhardt@gmail.com 👊🏻 😉
i would pay for your masterclass if you should have one. brilliant!!
Thanks for watching 😁
I have a property course with a mentoring option
Check out this link
To secure your spot, simply click payhip.com/LouisReynhardt and follow the easy registration process
Hello Louis it's guys here, got to love it :D
Thanks many! It's catchy, Hay 🙌🏻 🤣
Thanks brother again your channel is educational.What about private sale what you have to look for?
Thanks for watching. When you are the buyer with private sales, just make sure you set up the OTP to benefit yourself.
Always understand the motive of the seller and make sure that you are buying a good deal. A inspection clause is also a good idea 💡
@@louisreynhardt Thanks again my brother.
Make sense indeed 👌🏼 💯
Thanks my friend 👊🏻
Live is really hard for me cash or rent is difficult if there are no work and disability and helping big family not easy for one person working RDP House is all that I can buy to help my family then try so save the disabled family and look for work to helping 4 familys this is hard talk.. thanks for the video
Sorry to hear my friend but dont give up. Always keep hustling. Dont compare yourself to anyone and just keep dreaming and putting in the work. Goodluck my friend 🙏🏻
Here again, glad I subscribed! These videos are absolute quality! Thank you so much for sharing this information with us🙏
Thanks Tyrese, really appreciate the positive feedback. Thanks for watching 💪🏻💪🏻
Hi.Could you please explain the process of purchasing a house under your company's name and all the tax benefits so called 🙏
Absolutely, I made a video about this. You can Start with this video : th-cam.com/video/zBnt5J-DJEY/w-d-xo.html
The bottom line is always that cash is *never* interest free. There is *always* an opportunity cost because that cash would have been stored/applied somewhere else where it earns a return of some kind, instead of invested in whatever you’re buying. No one smart keeps cash simply floating around without earning a return.
This was a great way to explain it. You made some excellent points, and it's hard to ignore the fact that leverage is a great way to build wealth. I believe your comment will help many viewers and subscribers.
Thanks for sharing 👊🏻
I like this comment. Helpful
Great channel and advice you are providing.
Question: Which area/province in the country has the highest ROI?
Thanks so much for your positive feedback.
It's hard to say, but generally, Western Cape has done very well in appreciation, but overall struggle with Cash flow
Other cites like JHB or BFN do well with cash flow and have okay appreciation.
You can use a platform like TPN y
To track sales and price comps
Another pro by having a bond instead of buying with cash is that you can have insurance on the bond. If you happen to pass away the bond is paid in full and your family will not have to be in debt or have to worry about paying the bond.
Great tip. Thanks so much for sharing this 💪🏻💪🏻
If you buy cash they won't be left with debt either? So don't understand how paying double for something is a "pro"
@marcotaylor-poverello927 If you live in the property and it's your primary residence, it can make sense to pay cash or to settle the debt earlier. But using gearing with investment properties is a no-brainer for those who understand property investiong.
@@louisreynhardt I'd have to disagree. If you have the money then buy the property and rent it out. I don't see how getting a bond on a place and then renting is profitable. Say you find a R1.5m place, the bond repayments without a deposit would be around 16k, that is excluding rates and taxes and levies (unless you got a free-standing house). Let's be conservative and say that's an extra 2k. You're now paying 18k every month and you're definitely not getting more than 13k rent on a R1.5m property. So you're losing 5k every month, on top of that the interest rate has only been going up. We have not even factored in that tenants have complete control, it's almost impossible to evict someone. So you could potentially have someone living in your property, having not paid rent for months and you're unable to evict them. I have friends who have gone through this. The only way it makes sense to invest in property is if you buy a house that has subdivided land and you're able to rent out to 3 or more separate people. But in general property investing in South Africa through a bond is not smart at all, you're in a country where the wage to living cost is so disproportionate, people struggle to find good tenants who can actually afford their rent. So unless I am missing something I don't see how investing in property through a bond that ties you down for 20-30 years is a good idea in a country where everything is falling apart rapidly.
@marcotaylor-poverello927 You make some good points. But you are missing the fact that leverage actually protects you against everything you just mentioned. If you invest your cash in whatever deal. That money is illiquid. You still have expenses, whether it's cash or not. But now, when something happens, your money is tied down in the deal. The video I made explains exactly why you should not invest in the property you describe. Those are bad investments and will cost you money every month. You need to look for cash flow and equity. Your multi let option is a great way to cash flow, still have all you cash in your bank account , controlling an asset, and paying little to no tax. If you buy cash, you dont have access to the Cash unless you refinance, you will still have the same amount of vacancy or delinquency risk, and you will pay tax in your profit. You will also be able to buy 1 or
2 properties cash a year depeding on your income where with leverage you will be able to buy many more property and STILL have access to your cash. I would suggest reading the book rich dad poor dad cash flow quadrant or consider buying my course to understand all the benefits. Im not trying to convince you to use leverage because it also has disadvantages. That's the cool part about property. You should do it the way that works for you. If that's buying cash, then go for it. The rich use debt to acquire assets that generate cash flow and increase equity, and pay no taxes. It's as simple as that. Although only a small portion of people understand this.
Over a long term period depending how many years the bond is. You end up paying double the amount. Interest usually is the same amount as the installments. My opinion is to pay atleast 50 percent down-payment. Dont let Interest grow. Unless you do plan on selling within a year. If its long term, then this video makes sense over 20 plus years
Thanks for sharing . You make some good points. Using 50% deposit can greatly help you in the future with reducing interest and generating more cash flow. Thanks for your insight. All the best 👊🏻
Hey Louis, I love your content! Definitely my favorite local TH-camr! I wanted to know if it would be possible for you to show us your portfolio of the houses you have obtained thus far and income you generate from them vs the amount of debt you have undertaken
Thanks a lot, my friend. I appreciate the positive feedback. I'm glad to hear that my channel can provide value.
This is a great suggestion, but unfortunately, due to privacy and security reasons, I won't be sharing too much detail of my whole portfolio . Here and there, I share some real-life numbers but will gladly share more about the type of properties that I buy. Thanks again.
Good question.. I would also like to know which bank is going to give som1 multiple bonds based on the same income..
For the return on investment from the cash purchase, you should deduct the ‘interest that would have been earned’ on the cash as an expense to get a fair comparison. If you bought a house with a 100% bond (Option 1) you would still be earning interest on your cash and should add to your income and increase your ROI.
Thanks for your comment Ethan. You make some excellent points. Thanks for sharing your insight. That's a great way to determine real ROI.
Would it not make sense to buy a property cash so that you can use it as surity to purchase a second ?
Also, If the first property was purchased and some equity was achieved. Wouldn't It will allow you to take a bigger loan to buy the 2nd property ? You then ultimately have rent from two properties servicing the loan on the 2nd property.
You can definitely follow that route, but you will have to consider your taxes on those rental incomes. There's no wrong or right. You'll have to do what works for you. If you can afford buying cash, it certainly makes sense to have some paid properties. It also depends on your end goals in mind . Thanks for commenting 👊🏻🙌🏻
Thanks Louis for the great content. Like you, I prefer leveraging my investment property, it just makes sense for so many reasons.
The mistake I often see people make is taking out a 100% bond to finance an overpriced property that is cash-flow negative. The problem becomes compounded when you can’t find a tenant for 3-4 months and financial distress begins setting in.
So, leverage is a double-edged sword, it can work for you or work against you. You just need to know what you’re doing.
Thank you for sharing. I agree that there are many advantages to using leverage correctly, but it is indeed a double-edged sword.
Having adequate reserves is very important to reduce the risks of vacancies. I work on 10% of the value of the property for every property I own.
I have also seen 100% finance deals that went south. There is a place for loss-making properties in a portfolio to reduce taxes, but managing these is very important. Thank you for your insight. Appreciate it 🙏🏻
Whats up Louis its guys here!
Let's goooo 😄🤙🏻
Did I hear him say what's up Louis it's guys here?😂Hai this thing is hard but big up to you for teaching us the numbers. Thank you
Haha thanks my friend appreciate the support
Hey Louis, I wanted to know have you ever tried flipping houses? I wanted to know if it's a good idea or if it's best to hold on to the house and just rent it out
I dont do flipping because this defeats the point of owning a long-term asset and creating generational wealth. I have no problem with the strategy. I just choose not to use it. I want to use property as an investment for the long term and not for short-term profit. Why sell the goose that lays the golden eggs.
How can you use money in a savings account as surety??? A bank will not do that as that money can be spent at anytime since you have access to it.
The savings alone won't allow you to take on debt. It's a combination of your income and affordability and credit score along with your disposable income, like savings or investments that you can borrow on.
Whats up Louis, it's guys here.....
Yeaah buddy 😁😁👏🏻
Guys is a very good Louis!
Haha thanks my friend 💪🏻😁
00:00 Did anyone else hear him say "whatsup Louis its guys here"😂
🤣🤣🤣
Mind sharing the spreadsheet? I have always felt that cash is not the way I just ddnt know how to break it down
Sure pop me an email at louisreynhardt@gmail.com 👊🏻
funny opening line lol - you have my sub and like for that!!
Thanks my friend, welcome to the channel 💪🏻💪🏻
I think the first concept people need to grasp is a metric called ROI.
Then you’ll understand the true benefits of purchasing with leverage/debt
Facts 💪🏻😁
How do you avoid getting scammed if you're buying in cash??
Make sure you work with trustworthy team members. This is something I cover in my property course.
You will use an attorney to complete the transfer process so there are still legal steps to follow.
Where are you buying property for 400k in SA? Come to Cape Town - 400k won't even get you a shack in a township.
Focus on midlle to low income housing. Anywhere else but CT.
The Ct property market is focused on appreciation only. You won't find cash flow properties unless you do multi lets
Hi Louie,
I came across with you blog i found it very helpful. Could you please share with me your spreadsheet. Thank you and more power.
Paul Arnold
Vancouver BC Canada
Hi Paul,
Welcome, and thanks for supporting the channel. Glad that it can help in some way. You can pop me a email at louisreynhardt@gmail.com
Thanks Louie. I'll email you tonight after my office work.
I lived in a Country where income on property was frowned upon... instead people would offer services and goods as a source of income... the standard of living was way higher.
Interesting 🤔 💭
Thank you !!!
Pleasure my friend 🙌🏻 😎
If you older and over 65 cannot loan money for house. What will you do then
Great question Mary.
It depends on whether it's for an investment property or a primary residence?
I will consider private equity for an investment property when im older. Cash might be an option for a primary residence(if it's not all your cash), and you can always try to refinance a portion of the property even though you are older than 65. The banks can only say yes or no.
You can use cash for investments when you have a good enough cash flow. You can use it to fund the next deal. It will just be a bit of a slower process.
So Louise... what is the sweet spot when calculating ROI to give the highest return? is there a strategy here?
Generally, you can compare the ROI that you can receive from a bank( which is tyypically considered a safe investment ) the bank can yield 5%-11% depending on what type you use and the amount of money you have available. I look for 15% Roi on properties or properties with large equity available.
😮soo I have a good amount I can buy a house cash what exactly or how should I go about invest😮
Pop me an email at louisreynhardt@gmail.com if you want. Unfortunately, it's not such an easy question to answer.
Thank you
Pleasure my friend 😁😁
How do you do interest deduction for tax?
You have to get an accountant to help you with this so you can deduct it from your income earned to reduce your tax burden.
What are you opinion on property development?
I dont have much experience in developments, but it is definitely a more advanced property strategy. I personally like to keep things simple and rinse and repeat 💪🏻
How do you work out what is an appropriate rate to charge rent and how do you calculate all your expenses?
Also if I may ask, how many properties do you manage/own?
I would say market research and knowing your areas
You can use property 24 to search for similar properties and see what they are renting for and if they are struggling to rent them. Agents can be a great help too.
It's also experience and trial and error. You can use platforms like TPN that are highly data driven and can help you make accurate assumptions. I think the main thing is to do a lot of research and to understand your market. I would prefer not to disclose my portfolio . Thanks again for watching, and thank you for your comment. 💪🏻
@@louisreynhardt Thank you for taking time out of your busy day at this time of night to respond. Thank you for your advice. I respect your decision to keep your details on your portfolio to yourself. The reason I am asking is because how do you manage vast amounts of property like a champ?
@Mark71697 pleasure my friend. Some of the properties I manage myself and some I use reliable agents. The management is really not that time-consuming. The difficult part is always finding a good tenant and vetting them. The management should basicly be collecting rent.
@@Mark71697 My parents had wealthy friends who owned I think 30 or 40 million in properties (excluding the law firm the wife owned and the construction company husband owned) They either manage the property themselves or they hire someone to manage it all, for them their holiday homes they did themselves but the other properties was managed by someone else
Their daughter in this case is the one who did that
What is a high yield account?
Something like a Standard bank money market account. Yields around 8.75% right now, depending on the funds you have in it . Absa, FNB and Nedbank have their own versions of this. 💪🏻
I think this is matter of risk with time as for me i don't want to spend time paying for with yearly rising interest rate... So cash is fine for me
Thanks for sharing. It makes 100% sense. Theres many advantages to buying cash. I like the negotiation power that comes with it, and the majority of the time, you can get deals for a lot cheaper. 💪🏻
How do changes in interest rates because of fighting inflation affect the overall investments?
Great question, It makes a large impact on short-term cash flow. The best way to mitigate this is to have a healthy reserve.
Can I put my bond under a trust?
Yes, you can register a bond in a trust or any entity 💪🏻
@@louisreynhardtthank you. Can I do this even after getting a bond under my name?
What's up Louis it's guys here
Yeaah buddy 💪🏻👊🏻
Cash is King. And cash will always win. Your example was very simple and had basic assumptions. You ignored interest rate changes, and secondly, when calculating ROI you failed to consider the property value might increase or decrease. In the short term buying with leverage might seem attractive but in the long run the interest payments will negatively impact your ROI. If you buying with cash, what’s stopping you from using leverage to buy your 2nd or 3rd property. And yes you forgo opportunity cost since you are investing and you can always use a credit card, or get a secured loan using the property you purchased with cash to obtain lower rates, if you have liquidity issues. And lastly, it easier to scale your property portfolio using cash and some form of leverage than solely relying on leverage (an individual might have a average credit score or gross income that won’t allow for qualifying for additional credit).
My advice to all: always try to minimise debt (preferably no debt) in your personal life. Only use credit when doing business. If you default on your credit repayments, all you do is just file for bankruptcy and open another business. However, if you mishandle credit in your personal life, it stays on your credit record for forever.
Great information, Victor. You make some excellent points. Cash has many advantages and can work well for some people. The video was made to show the difference between the two and what I prefer, not what's the best for every single person.. Cash can be a smart move, but many people dont have the funds to buy property cash. (Majority of South africans) Leverage certainly has some risk, but cash also has risk. Some of the largest ones are taxes. But again, this video was simply made to show that your ROI on leverage will ALWAYS be higher than cash because you have little or none of your own money in the deal. If i use the banks money and I go bankrupt, I still have my liquid assets such as cash safely stored away. If you buy property cash, it can be attached.
Although I rarely consider putting down cash. As you can see in the comments, many people prefer cash, and some prefer leverage. That's the cool thing about property. You can invest in it in the way that you prefer. Thanks for sharing your thoughts. All the best
i understand what you are saying,but if u are on pension you do not have a working monthly income, so im sure no bank in SA will give u a bond to buy the property, because how are you going to pay back the bond, and even if you earn a pension no bank allows you a bond
You can always focus on private equity or angel investors but Buying cash is not wrong at all. It all depends on what you are trying to achieve, your goals, and where you are in your life. You can always use a large deposit and finance part of it and use bond insurance to reduce the risk for the bank 🏦 😉
So I have this saved on TH-cam. And there's a song saved before this video which I constantly listen to. Everytime it ends, this video starts and I laugh everytime I hear..
"Whatsup LOUIS, it's GUYS here." 😂
This is so funny. Im glad I can make you laugh. Its a catchy intro 🤣🤣
@louisreynhardt Definitely memorable! 🤣
Can we get a copy of that excel with the formulas??
Sure, you can pop me an email at louisreynhardt@gmail.com 💪🏻
Very helpful videos. 👌🏾 I have a question, how can the value of a tax deduction on tax be more than the interest one pays ??
Thanks so much for watching 🙌🏻
Sorry, do you mind just rephrasing your question ?
Maybe this will help. Please elaborate on the comments made here 3:18 (timestamp on the video)
@another_coding_channel_argh sure, so if you pay cash, there wil be no bond (your bond has a principal payment part aswell as a interest payment part) the interest can be deducted to reduce your tax but if you buy cash and dont have a bond you dont have interest to deduct meaning your taxes will be more. Hope this answers your question.
Hi Louis, can you do another example on your spreadsheet with tax implications? That way, people can see how much tax they will have to pay to SARS if they don’t leverage vs leveraging.
Yes, please. I also don’t understand the tax benefit you mentioned in the video. I feel like I have missed out somehow. Please can you do a video on this 🙏🏼
High ROI with low liquidity puts you in a long position, yet low ROI with high liquidity makes you to be able to short the position. It really depends on the person’s investment strategy.
Absolutely, what a great way to put it. Thanks for sharing 🙏🏻
this seems like a bad idea when buying an investment property... when i want to live in the property, does cash make sense?
It can make sense to buy your residence cash if you have more cash around. I will never use my only money to buy a property. It's way too risky. Theres certain ways to work around the risks, but it is generally not a good idea to invest all your money in one asset class.
@louisreynhardt I just want to stress this is informal not real financial advice. 😆. For legal reasons.
I think the general rule of thumb is to maintain an emergency liquid cash fund, and if you have excess, then it's a decent idea? Decrease your interest costs etc. 7-10 year timelines etc.
@Strngbd No stress my friend. Look, everything has its positive and negative sides. You need to understand your goals and vission to determine what will work for you. Even though I can buy properties cash, I will always use leverage because that works for me. And I guess that's the awesome thing about property. You made some very valid points, and I hope that someone will notice your comment. Thanks again for watching 😎😁👊🏻
Louis, consider this: if someone loses their job after paying a 20-year bond for 10 years with monthly payments of about R5 000 (R5000x12x10 years = R600 000 loss), what's the real benefit of having a bond over buying the property outright if you have the cash? People often aim to pay off their bond quickly to minimise interest payments and reduce the risk of foreclosure if they can't make payments in the future. If someone buys a property in cash, they'll still own the property even if they lose their job, while those with a bond risk the bank auctioning off the property at a lower price if they can't keep up with payments. So, who truly benefits in this situation? (This is South Africa where companies cut employees daily with less chance of securing another job in a short period of time). This is my two cents.
Thanks for sharing. You make some great points. There is no wrong or right. You need to do what works for you. I just share my approach to educate where I can. Buying cash can be very lucrative. I would just suggest not having all your cash in your property because you can still run into problems and fall behind on maintenance, repairs, Rates and taxes, insurance water bills, security etc. So if you buy cash, make sure you have separate cash reserves available. Hope this makes sense. Again stick with your gut and do what works for you.
Compounding and cash flow. Remember he is referring to rental property and buy to sell.
Hi Louis! Enjoying your content. How much do you think you should put down when using leverage. And why? Also when using leverage do you try to pay off the debt sooner or do you pay it off for the duration of the term? Would love to know what your portfolio consists of. Thanks Louis!
I have separate entities with different strategies. But a large portion of my portfolio is heavy leveraged, where I usually take out 100% loans and only pay around 10% deposit when the bank won't grant me a 100% loan.
I would say for most people a 20% deposit would be great because you save a lot of interest and your monthly payments will be much less.( with that said not everyone can afford it, especially new investors or low to mid income earners)
I do not try to pay off properties sooner because I am still young. I have time on my side. I have had multiple opportunities to settle the debt on my properties, but that just doesn't form a part of my long-term goals and strategies. Just remember that it is different for everyone and you need to do what works for you 💪🏻💪🏻
Hopes this answers your question
@@louisreynhardt Thank you Louis for your insight.
Hi, why did you say that you should never buy property in your own name?
Because there is only one advantage to buying in your own name : its easy to do so.
Buying in a different structure gives you tax advantage, asset protection, growth potential, and estate planning
This is assuming you can get a loan, not to mention multiple loans. As a business owner (with a turnover of +/- R10 million per annum) I can tell you it's not easy, if at all (even with a perfect credit history) because I am considered as a "high risk individual".
If you have R100m turnover and can't get a bank loan, something is seriously wrong. Banks want to see cash flow. Revenue means nothing if OPEX is more than revenue . Im.sure you should be able to sort this out with some specialized guidance. Thanks for sharing. All the best
@@louisreynhardt It's not 100, it's 10. Yes, you can lie but that is FRAUD. Ever since the collapse, & more so Covid, the banks are extremely cautious. The only way I could get any loan was an overdraught on my business account & that was only enough for an undeveloped plot. In the end I put my business up for sale & that was also a nightmare coz the banks wanted buyers to put down three quarters of R 3 million deposit. This was even for other franchisees with 10 years track record. Long story short it took two & a half years to sell. I have now started two other businesses (with cash) & I have started to build my house (with cash). I will never make debt in my life again coz as they say, sh!t happens, things can (& have) changed over night.
But within 3 years you can have 150k with your can invest in buying of land or invest with mutual fund..with a bond repo rate increase has a negative infact
Interest rates sure have a negative effect on your investment. Unless it actually goes down. Maybe it will go down in the second quarter of 2024. Land is also a good investment if you can grow crops or utilize livestock.
Baie dankie boeta 😊
🙏🏻🙏🏻🙏🏻
@louisreynhardt your advice is excellent brother. We really appreciate your work.
Thanks so much for the positive feedback. I'm glad I can make an impact 💪🏻💪🏻
If you buy using the banks money...and end up paying double due to interest can you still say you used the banks money
Yes, you can. Remember, if you generate cash flow, then your tenants pays the interest and not you. Although, you are liable for the interest as long as you have a tenant that keeps paying you, you dont have to worry about all the interest
@@louisreynhardt ok will the same apply on residential property?
Do you mean your primary residence? If so, then no, because you will be paying the interest
Is that intro a twist 🙃 what's up Louis it's guys here 🤣
Yeah buddy, I'm glad you caught it. Thanks for watching 💪🏻
I have a question, can I buy a property with credit cards?
Yes, technically you can withdraw the money to pay for the property cash, but the high interest on the credit cards is going to kill you. What is your current credit card interest , do you know?
Bank financing is much simpler and less risky
@@louisreynhardt Wasn’t thinking of making a cash advance, cz I understand the interest would be merciless. Jus a normal credit card transaction for this property purchase not “withdrawing” it. I’ll use half cash and then other remaining balance on credit card(s). I was thinking for the credit card(s) I would just be working as usual and paying off the balance monthly, from my paycheck and the newly bought property would on the side giving me monthly income. What do you say?
I have 28.49% for purchase APR
And 29.99% for for cash advance APR.
@storeroom1503 I would suggest using full bank finance. If you borrow money in any way from a credit card, the interest is very high. You can borrow at 12% from the bank. This is a much cheaper option.
But paying 20% interest which keeps going up everytime you pay is the bad idea.
Thanks for your comment. No, it's not a bad Idea its just not the best way to grow a portfolio. I'm not sure who is charging you 20% interest, but you should run away. Buying cash, like you know, has many advantages like I mentioned in the video.
The isn't really such thing as 'pros' and 'cons. Those can't afford to pay cash for a property have no money to do so. It's as simple as that.
Absolutely, it's true in some cases. I choose not to pay cash. Hence, the pros and cons. Most South Africans can't afford it unfortunately, thats why Leverage is such a great tool.
Whats up Louis its Guys here lol
😁💪🏻💪🏻
This hit home for me....Financial institutions can only give me 50% bond approval since I am not a citizen. For all properties I purchased so far I had to put a 50% upfront deposit, I use accumulated equity for the deposit and I simply repeat the process on scaling.
Great stuff. Its smart to use your equity when they dont want to give you 100% finance. You are basically beating them at their own game. Thanks for sharing . All the best 💪🏻
You also own it from day 1 vs the bank. Cash is King.
Great point. Certainly a big advantage to have full ownership. Thanks for sharing 💪🏻💪🏻