 Welcome to the private property podcast with myself Zaman Donga and of course from now on will be bringing you this show every day during this lockdown. A lot of us as landlords or tenants have quite a lot of questions about what the impact of this lockdown is on our property portfolio or even on our property ambitions and of course on this show will be bringing you different experts to help us navigate this uncharted territory and really help us make sense of where we find ourselves in the property market. Now coming up on today's show it's going to be quite an interesting one. So of course the reserve bank governor announced earlier today that the repo rate has been cut by a hundred basis points and this essentially brings the South Africa's repo rate to 4.25 percent and the cut will be effective from tomorrow. Now the bank's decision will also lower the prime lending rate to 7.75 percent. Now this comes after the bank brought the scheduled meeting that would have essentially happened in May forward to today and of course they are responding to the COVID-19 crisis that we find ourselves globally. The reserve bank governor was saying in the brief earlier today that the decision by the NPC to lower the interest rate was unanimous. So there's no confusion about the need for the repo rate to be decreased. Now today's show will be unpacking what this essentially means if you've got a home loan or if you're looking to get into the property market what the effects of a lower interest rate essentially are. Of course you can always stay connected with us on Facebook as you're watching us as well as on our other social media platforms whether it's Twitter or Instagram and you can ask the questions that you would like us to you know address during this conversation so if you're confused about what this decrease in the interest rates means do send us your questions and we'll be addressing them. Now tonight's show I'm joined by Yaku Chobalahu is the managing director of prosperity enterprises. Now Yaku good evening thank you so much for joining me today. Good evening thank you very much. So I think before we even start with you know the breakdown of what this means for your home loan perhaps take us through where we're finding ourselves in terms of South Africa's property market right now. I mean this is probably the first time that we're seeing three different interest rate cuts in such a short period of time and we saw the first one of course in January by 0.25% and then there was one just less than a month ago just before we went into the shutdown there was also by 1% and then of course today they're announcing another 1% so 2.25% does have quite a big impact even on the property market. Can you just take us through an overview of where we find ourselves in terms of the property market in South Africa? Thank you Zamanthonga. Yes we certainly do find ourselves in very very interesting and very unique times and the interest rate cut today has been very very good news to us and also the previous cuts. So just to touch on that and what that really means is you've got a monthly bond that you need to pay and a big part of that bond is interest on the mortgage bond that you have and with the interest rates being cut it means that your monthly bond reduces and if you are a property investor that has a huge impact on your cash flow because as a property investor you don't just have one property you have many properties and on each of those properties suddenly your cash flow can significantly improve but before we get to that Zamanthonga I think a very very important thing that you point out is to discuss where are we at in the property market? What is currently going on in the property market? Now there are so many opinions out there and for me it is so important that one has perspective. The property market is certainly in a bias market which means that there are significantly more sellers than what they are biased and what that means is that the buyers have got more leverage over negotiation than what the sellers has and this has been the case before the COVID-19 crisis has taken place and before the global economic dilemma that we are currently sitting with. So basically what this crisis has done or will continue to do for quite some time I believe is it will push us even deeper into a bias market meaning that there will be even more people selling and even less people buying at least in the short term. Now this will be for many reasons the main reasons obviously being economic reasons people being uncertain people not being sure if they want to invest people not being able to invest there may be many people in times like these that cannot afford to have their property anymore and they have to sell it they have no choice but to sell it. Now for somebody that has a slightly longer term perspective and then somebody that is really looking at building wealth sustainable wealth through property investment this is an absolutely perfect time to climb in and and to start building your property portfolio. I recently read that Warren Buffett is sitting with over a hundred billion dollars of cash and he keeps that kind of cash ready for times like these when there's an opportunity to invest and if you look at the greatest investors of all times they have always and that is just as applicable to property as to any other kind of investment the best deals has always been made in the worst of times. The most investments the most acquisitions of many of these investors were often made in the worst of times because that's when you can buy assets for cheap that's where you can acquire assets at very very good prices and I believe that is where we currently find ourselves in the property market. And and just to come in here I mean the reality though is that there aren't that many people who are at that level right there probably aren't a lot of people and they're probably watching us at home right now who are sitting on large cash reserves or relatively big cash reserves and are able to take advantage of some of these opportunities. Perhaps we should maybe break down this eight five types of people that we probably going to find during this crisis right so the first one of course being somebody who already has a home a home loan rather and wondering whether they should be paying more right now and you always hear these tips around paying extra on your home loan and the advantages of paying extra in a home loan and the second person of course would be somebody who has a home so they're staying in their primary residence that's still bonded but then they also have perhaps one or two maybe even more rental properties. How can they take advantage of this because you typically tend to find that different people advise you differently in terms of your how you structure your rental properties or how you pay into your various sort of bonds for your respective properties. So I want to just first start with those two I mean there are other three so the other three is perhaps you you don't have a home loan at all you're either renting or you're living at home and you've been kind of interested in property but it's just been one of those question marks and another of course is perhaps you already started to start looking and you've maybe spotted a few and you've gone into the private property website and already seeing that prices are seeing price reduced as we keep seeing so you can see that there's an impact and you're correct we're already seeing prices going down before COVID-19 crisis hit our shores and so maybe they're already contemplating making an offer and perhaps you have another person who's already made that offer and they're now thinking wait maybe I should rather wait out and not go through with that particular deal maybe find a better deal because this one doesn't look so great and so I think let's rather just unpack what this crisis essentially means for these types of people and how they can respectively you know take advantage of this or how they can best cushion themselves so they don't find themselves in a financially tight situation so I think let's start with sort of one of the sort of obvious ones which is of course people who already have a home loan and live in that primary residence they don't have any other home loan should they be paying more should they be paying less how can they navigate these these times I think what is very important is first and foremost you need to have a plan in place you need to have a strategy in place of where you are going there are so many questions or so many so much advice being given on whether you should pay off a bond quicker whether you should pay off a bond slower should you have a 20-year bond should you have a 30-year bond in a time like this where interest rates are reducing should you stick to your original payment and in that way pay off the bond quicker or should you use the extra cash flow that you have to maybe acquire more property so there is so many different options of what you can do and the thing that you need to do first and foremost before anything else is you need to look where you are currently at can you can you afford can you have what can you afford at this stage how is your budget looking how is your cash for looking and also to plan for some of the for some of the concerns that might arise in this time and I mean we've we've listened to interviews on private property speaking about what's the rental market going to look like and what are we going to do and when there's tenants that have lost their jobs or that maybe can't pay their rent so there is obviously a risk as well and you need to take that into your plans into consideration as well and when you are an investor that maybe doesn't just have a property that you are living in but has investment properties so the starting point before anything else is to know where you are at to know what your budget or your your cash situation or your investment situations looking like and then what your plan is to go forward so many people find themselves or many people own one property and that is the property that they live in now often that property that people live in can be a great investment property as well so something that I would often encourage my clients to do is not to always see your primary residence just as a primary residence now not all property necessarily lends itself to be great investment properties but a lot of people live in a primary residence which is a good investment property and the first thing that I always challenge my clients with is to start looking at your primary residence as if it is an investment property now we often work with structuring and we would often use the example to say that you could for example not even own your primary residence it could maybe be owned in a company or in a trust and you could be rent from that entity because you know in two years or three years or four years or five years you might move out put a tenant in there and that property forms part of your investment property so all of these things need to be considered that being said what should you do given your strategy if it is a great time of course when you don't want to invest further and when you do have cash flow to push as much into your bond as possible because interest are low and that enables you to pay off much bigger chunks into your or you can pay much bigger chunks into your capital and start paying the bond off that will enable you to pay off your home that you are staying in or your primary residence but as a property investor we often look at things from a completely different angle because cash in our hands are opportunities to invest and the more access we've got to capital the more deals we can make the more properties we can acquire and and the greater wealth we can build and in a time like this I want to acquire as many properties as possible so in that when one looks from that angle suddenly everything changes because you are not looking at how quickly you can pay off a bond instead you are looking at how slowly can you pay off the bond how little money needs to leave your pocket because that enables you to acquire more investment properties so putting that in perspective I often get the question should you take a 20-year bond or a 20-year bond yeah because I mean a lot of this is related to exactly that and I always say a 30-year bond and people would always ask me but why on earth would you take a 30-year bond and my response would always be the same because there's no 40-year bond available and the reason and the reason why we think like this is exactly what I've explained previously that everything is about cash flowing investment and the better your cash flow is the bigger property or the more investments you can make in property so then you don't then you would rather want to use that extra cash that you have to maybe buy another investment property. I've got another question here I'm going to firstly to finish because I've actually got another question around whether you should pay off debts or use this opportunity to be paying off other debts so of course perhaps in addition to having a home loan or multiple home loans you might be paying off your car might be paying off your credit card and other expenses or other credit and do we rather focus on that and or going to perhaps buying another property but before we get to that question I think you're just finishing off a point. Sorry thanks. I think what is important or what the viewers can keep in mind is that a property empire is both one property at a time you know so we are talking about the spiring property investors we are speaking about people that maybe don't own property yet or people that have one or two properties and they want to bolt that and that gets done over a time period step by step and I think in times like this and I mean especially with lockdown as well it's a great opportunity to sit back and to plan and to think what it is that you want to achieve and where it is you want to go and then to put a plan of action to work towards that because everything that we are discussing tonight one would first need to refer back to that plan and see where it is that you want to go. So I love the question that you just asked you know and I think I mean it's such a subjective topic so whatever I answer today there are going to be people that agree with me and there's going to be people that completely disagree with me should you pay off debt now or should you acquire more debt. Again referring back to what your plan is now I personally although we take on a lot of debt for good investments what we refer to as good debt I'm not fond of bad debt at all and the reason for that is people often use debt to live above their means they use debt to acquire things that they shouldn't actually be acquiring now because actually where they are at they can't afford it now so it's almost like trying to take a shortcut or cheating the system to try and get certain things and in that regard I'm not I'm not very pro debt in things that's not going to grow in value so having a call or having a clothing account or having overdraft that debt is most of the time used for living expenses and a lot of those debts are at very high interest rates so usually my advice would be to stay away from that kind of debt as far as possible but then in the same breath when it comes to good debt that is being used to acquire assets that is growing in value and that is creating returns for me there I'm very pro debt and in a time like this I would even acquire more debt okay so if you're joining us at home or you've just joined us at home of course this is the private property podcast and tonight's topic we are looking at what the lower interest rate means for your home loan we're talking about some of the opportunities and perhaps risks in the property space given the lower interest rates for the first time I think in South Africa we've had three interest rate cuts within a space of three three four months so the first one of course was in January then we had a second one just last month and today we had another interest rate cut so that's 2.25% from January to today and of course they're different you know sentiments around what this lower interest rate means especially for people who either already have property or are looking to get into the property market and and perhaps have question marks around how best to navigate this time or if this is the right time to buy I think they've given so many questions around is this now the right time to buy and has the question there is what are you buying you're buying a home to live in are you buying an investment property or whatever the case is so if you've got any questions or comments do share them below on our Facebook page you can also share them on Twitter and we'll be discussing them tonight now I think let's also now sort of look at what are the opportunities and risks during this particular time I mean you're saying earlier when we're speaking that when we look at a lot of the greatest investors whether it's Warren Buffett or any others and a lot of them typically tend to have fairly large cash reserves and a lot of the acquisitions are after crisis like this whether it is was the financial crisis in 2008 or any other financial crisis so they're able to take advantage of that particular opportunity but similarly people also make bad financial decisions thinking that perhaps this is a good investment or this is the step in the right direction so what are some of the opportunities and risks given the lower interest rates which was specifically in the property market right as mentioned we are finding our ourselves in times where they are great buying opportunities so they are great investment properties out there and we believe that they were great investment properties out there before the crisis and after the crisis that will just escalate so the opportunities out there the properties are out there properties are selling at very very good prices over the last number of years we've seen very slow growth in property because of the times that we find ourselves in so it is a bias market prices are good the opportunity is out there there are however important things that needs to be in place before you go out and and take advantage of those opportunities the first thing that I want to say and and that's very very important because there's different ways that we can approach that and and and how to how to sort this out but cash is key so wherever you are at now I think it is a very very important aspect to look at in your portfolio is what is your cash reserves looking like and what can you do to improve those cash reserves so if you especially if you want to acquire more property so the opportunities there the properties out there but the last thing that you want to do is overextend yourself now it's it's almost like a five-year-old walking into a five-story candy shop you know is is you want to control this and and you want to make sure that you don't put yourself in a position where you overexpose yourself or where you may be acquire a lot of properties and then interest rates starts rising at the later stage again so all of that needs to be taken into consideration you can't have a big property portfolio with no cash you're looking for trouble and you can't be buying more and more and more properties and not have cash as reserves now there's a lot of ways that you can get cash you don't necessarily always have to save up for it a lot of people are sitting with properties that have equity in it now again we are referring to a specific strategy so this is not applicable to somebody that wants to settle their debt now and and remain or or have a very slow growth in their property portfolio there's nothing wrong with that that strategy is just gonna look different but somebody that wants to invest now often a good thing to do is just to get your cash position better and one of the ways that we often do that because structuring is so important as well is with what what what a lot of investors do when they start out is they move their properties from their personal name into their structures and so in other words the entity they trust or their company purchases the property from them it is refinanced at the new market value or it is purchased and financed at the market value and that creates a lot of cash and capital that becomes available to now stop building a property portfolio now my advice to my clients then is always don't use all of that money to buy more property keep some of that money back my personal rule is that you should have 10% cash reserves of the value of your properties now that sounds like a lot but that means you can still gear 90% which is a very very high gearing ratio and there's a reason why they don't say equity scheme they say cash is king and there's a big difference because you can have equity in a property but if you don't have cash and you find yourself in trouble it's not necessarily gonna help you much so you can still gear very aggressively you can still finance a lot of properties but don't do that without having cash reserves in place we often refinance properties to make cash available we keep it in the excess bonds so that we don't pay interest on that money that we have refinance but we keep it there as reserved so that we have sufficient reserves in our portfolio in a business you would call it working capital and in our property portfolios we call it cash reserves for all the different things that can happen so speaking of the risks as we said the crisis can affect the rental market significantly and rental collections vacancies defaults all of those things can become a significantly bigger problem in the next couple of months than what it was now I factor those costs into the cost of my investment so when I'm buying a property now I'm not just thinking of the purchase price of the property I'm thinking of the possible higher vacancy that the property might have in the short run it's not to say that it will be that there will be more vacancy but a lot of people suspect that could be the case or the possible higher defaults on rent payments and I factor those costs into my investment that I'm making in the in the property but it's not just about factoring those costs into your investment it's actually about making provision for them and for that you need cash so you don't want to find yourself on the wrong side of the table you don't want to find yourself in a position where you maybe lose your job or where you maybe can't afford your bond or where you find yourself in trouble and now you can't now you can't honor your commitments so from that regard you have to make provision first and foremost you can't you have to have fact you have to build up reserves you have to make sure when you are entering this time whether it is just to reserve or to protect what you have or whether it is to grow that you've got enough fat that you have enough reserves with you to go through this time irrespective of whether you want to grow or just protect what you have now we've gotten some questions that are coming in of course if you want to have some of your questions answered you can ask them below and we'll be addressing them tonight because we're talking about what their lower interest rate means for your home loan or your property ambitions now this question comes from Val Cabella Chiombo who asks can we know if a standalone or block of flats will make sense at the stage because we need to look at risk of repayment it's a very good question but it is it is also a very difficult question to answer I don't think a lot of people have opinions of what collections are going to look like and what defaults are going to look like in the next three to six months or in the next 18 months even but it is it is very difficult to say that this is this is what's going to happen this is how the economy is this is how things are going to go this is how many people are not going to be able to pay their rent so are those investments or could those investments still be very good investments absolutely but you do need to factor in the risk aspects you do need to factor in the the the risks that comes along with that especially in this time and it's going to actually be quite interesting to look at that rental behavior or the payment behavior from people I mean I remember earlier this month TPN data was showing that 24.16% of tenants were listed as did not pay for April and there was already on the 7th sort of and a lot of the landlords some of them I suppose were were quite finicky right because on the one hand we're all understanding that we are finding ourselves in a crisis right now and they're probably people who are not going to be in the best position to be able to pay and on the other hand landlords also have their rent their bond payments that they need to make and this was actually something that we've covered in one of our episodes so if you've missed that episode do you scroll into our Facebook page and you can listen in on that episode we did with Michelle Dickens from TPN as well as my official friend she was an award-winning journalist we're looking at you know how do you best navigate this as a landlord who has a tenant an attendant who either hasn't paid or a tenant who might not be able to pay on time TPN actually released I think it's a rental essentially essentially a rental package to help you enter into a new contract if you want to be able to use the deposit that's been used so legally entering into that new contract or if the tenant is going to defer the rental by a certain percentage so if you have question marks around how to best navigate that we've already covered that on episode two of the private property podcast so do watch after that now yeah I think one of the other things then we want to look at is we're missing that there are people who are you know perhaps already have their feet you know in the water in terms of their property portfolio and they have two or three properties how can they best position themselves right now and let's argue maybe they didn't buy in the best structure maybe you've bought in your personal capacity because you are still kind of starting out and only now are you slowly learning about you know structuring and moving your things into a PTY or trust so how can they best position themselves to be able to take advantage of the slower interest rate right restructuring is often a great opportunity not just to get the assets in the right entities but also to make a lot of capital available as I said so many of my clients very often I sit with a client that has two or three properties actually the majority of my clients and it is owned in their own name and by moving that over into a more formalized or a more structured structure you know a company or a trust with its own financial statements its own bank account etc in other words running their property portfolio more like a proper business and through that they also make a lot of capital available because when they move those properties to their trust or their company their trust or their company one of the approaches that you can take purchases that property from you at market value and it gets financed at market value which means that if if you have a property that you that you have an outstanding bond of 700,000 Rand on but the property is worth a million Rand now if it gets financed at a million Rand that's 300,000 Rand of cash that comes to you that you that that is made available through this process now of course there's costs of restructuring that one must not overlook but that creates an opportunity I always say to kill two birds with one stone because not only are you getting your structures right you are also making capital available that's step one now step one is covered with step two you are sitting with sufficient reserves you are probably you are probably far over the 10% example that I use where you want to have 10% cash to the value of your property portfolio if you free structure and now you can use some of that additional capital or available capital that you have to purchase additional property at very very good prices in the current market and so I mean Yaku on that and I know we'll probably call you back for another interview where we look at structure because I think that's also a topic on its own that can get very technical and it's essentially needs people who are already have you know whether you're you're ready to essentially buy or you already have a portfolio and you're looking at practical tips in how to restructure in the example that you've given where you're saying that you've got clients who typically would have perhaps two or three properties and they'll buy the and they in their personal name and perhaps their PTY will buy the properties from their personal name and it gets refinanced and they're able to have you know cash to essentially work with in that particular transaction are they then who's who stands a surety because suppose you go and you go into CIPC right now and you're able to register your business we know two days will be done you open your bank account in a week all that admin is sorted and you go to the bank obviously now this new company hasn't been operating the country to show any income or expenditure so are they standing a surety in their personal capacity even though the only structure is now of course in that particular PTY definitely the individual whether it is the director the trustee would still need to sign surety for for for the transaction that's taking place in the entities as you said later on those entities are having they become more independent as as the property portfolio grows and and the income or the profits in the entity grows okay we've got more questions of course if you're watching us at home you can send through your questions and we'll be addressing them the next question comes from um Tanjo Amtolo who is asking will the current rent will the current crisis also reduce the current rental rate and if my property is due for lease renewal what what would be the best increased percentage 46% or should one go lower that's a fantastic question one tendra and and I'm very very happy ask that because up until now we've only focused on the one side so interest rates are coming down our bonds are coming down but what is going to happen to actual rent being received and everything everything works with supply and demand every you know and and the answer that I usually give when I'm asked about rental escalations and about the rent that you can ask you can only ask what the market is willing to pay so if there are 10 units in a complex that's renting out for 6000 rand you are not going to get 7.5 or 8000 rand the market determines the price and and the new price is at 6000 rand now if you had a tenant in there for 7 and a half thousand rand and you now want to push it up with say somewhere between 5 and 10 percent or whatever that percentage is and you for example want 8000 rand now if the tenant sees but there's other properties renting for 6000 rand all they are going to do is say thank you very much I'm cancelling my lease or I'm not not renewing my lease I am rather gonna move to to one of those properties so whenever I have properties in my property portfolio going vacant the first thing that I do is I go on to private property and I actually see what are similar properties renting out for because that is the price that's being determined by the market if there's too many properties that offers the same than what my properties offers but the price is lower I'm not going to get a tenant so that is something that we will have to look at now this is where it becomes very interesting and I think there will be a lot of opinions around that and is demand for rental property going to decrease where all those tenants gonna go to because everybody still needs to stay somewhere so people might move in the in the you know people might downgrade or people might move to cheaper properties or the type of tenant so that the demand over all is not going to decrease for property the population is still what the population is there's not suddenly less people that want to rent so from that regard the demand is still there but where the demand is decreasing is the number of tenants that are good to be a tenant for you because a lot of people's credit records or affordability can be negatively affected through a crisis like this which means that the number of good tenants or tenants that you would be willing to place in your unit that might reduce and where that reducing in demand as we are taught in economics that also brings down or could bring down prices so this there's a good chance that there's a there's a very good chance that I mean rental escalations has been low the last couple of years I personally believe there's a very good chance that those rental escalations could even be lower that there might even be decreases in the rent that you can charge on your properties so to answer the interest question once you approach renewal you have to look at what is in the market what other similar units are renting out for and and base your decision on that and I think the picture I mean if you if you go in this into episode two this was also something that we did cover on on episode two when we're looking at some of the financial relief or the financial implications of this particular of the COVID-19 crisis in property whether you're a landlord or tenant so it really is worth going back and listening into you know particularly that section around the effect to your credit score because the tenants who might be scared that their credit score might be affected because they're going to be paying their rental late so there are ways to mitigate that and ensure that your credit score also doesn't decrease and as a landlord there also tips that would give you that in the event we have had a tenant who's been staying in your particular property for an extended period of time and they've been a fairly good tenant there certainly isn't any need especially in this economic climate to be increasing that rental especially when you as a landlord might have other ways to to take that cost financially so whether you're going into a conversation with your bank and of course with lower interest rates they essentially do help you as a landlord we've got another question here Yaku from Michael Fannikar who asks how will the banks evaluate their ability for loan repayments in light of the after effects of lockdown and uncertainty about job stability also also a very good question a couple of points that I want to make so banks are in the business of lending first and foremost so the revenue of a bank is interest so that is that is the income but banks only want to lend to people that are obviously going to pay them back so in a case like this where there's more instability where there's higher risk for the bank because that's in effect what's happening a lot of banks might or could take a much more conservative stance and be more careful to lend which could make it more difficult for you to get financing or the banks might have stricter requirements before they would give would give a loan now that's completely my opinion I'm just just looking at basic economic fundamentals and that is something that you have to take into consideration so the risk factor is definitely increasing for a lot of people but banks also don't want to stop doing business so if there are people out there that's got good income that's that's got where there's their safety in in in in in the occupational in the income that they have their affordability is good they've got a good credit record banks would still be willing to lend to people like that okay and then we've got another question here that's asks and it's from Val Q. Umbo asks will the area matter at this stage will high market properties and be a high risk because tenants in such areas may not be able to afford 20 or 30k per month also question often you see in times like these or in times of crisis is that your more luxury property has falls further than your entry level property for example and that's got very much to do also with supply and demand because and it's exactly as vol said in the question there is everybody needs to stay somewhere so so so a lot of people may downgrade but in which price brackets how is the movement between the price brackets going to be a lot of people when they find themselves in difficulty might need to downscale and there might be few much fewer or there might be so many fewer people that can afford for example maybe a property in the three or the four or the five million rent mark and which creates a great opportunity of buying at great prices in those price brackets but also there's a reason why you're buying it at such great prices in the short run especially you know from a from a rental perspective the demand will decrease or could decrease drastically and also your affordability needs to be right for that but if you are thinking of buying a nice luxury property in this time and you have cash now is certainly a very very good time to do that and we've got another question here you've partially answered you know an aspect of the question starts off by saying the decrease in the repo rate enables more people to switch from being tenants to home owners however will the banks require company stability in order to determine that prospective buyers are able to repay their home loans that's that's a extremely good question we really getting great questions tonight so you're sitting with a balancing scale you're sitting with the two sides because on the one side and then I think to a big extent the one is trying to cover the other one on the one side we are sitting with interest rates coming down that making it more affordable to have a property to own a property or to have debt it enables many more people to actually get a bond to afford a bond so that's like always good but on the other side you are sitting with more uncertainty with more concern from the banks perspective of employment stability or income stability for example and the banks are definitely going to look at both sides of that if the question is which side is gonna win I don't have the answer to that but yes the banks are definitely going to from a affordability perspective if you still have the same income you'll be able to qualify for a bigger bond now because of the bond being more affordable but from a risk perspective or from an uncertainty perspective the banks might be less willing to lend because of because of instability in the market so so it's it's a balancing scale between the two okay and we're going to be slowly wrapping up I've got another question from a tender it seems that the issue of restructuring is quite a popular one and and and as I said we'll probably cover that topic by itself because it's quite a big and a chunky one and has different layers and almost want to guide people in how to best structure it from the beginning and then perhaps once you already have a property portfolio how do you then work around restructuring it at that point now I'm tend to ask if the P2I buys from the my personal name will they will they not be any capital gains tax and transfer and bond registration fee yes they will so not you not all scenarios is good for restructuring in in that regard sometimes you need to look at other alternatives like for example asset for share swap which we won't be able to get into tonight but different ways in which you can do that restructuring where you can reduce the capital gains where you can reduce the transfer duties etc the shorter answer to that question is that in certain instances the restructuring makes a lot of sense especially when the capital gain is not too much and it's not too much not a too expensive property so up until a million rent is no transfer duties and that's usually a good benchmark for me as well any property below a million rent that hasn't had too much capital gain is perfect for restructuring but when you are looking at a two or three million rent property and there's maybe five hundred thousand or a million rent capital gain already then we need to get a more sophisticated restructuring approach because the transfer duties and the capital gains tax is going to be too much now a question from Felix Sidney says a friend of mine wants to refinance her property but her credit score is on minus and they they self-employed and no hope of getting money but the bank didn't approve her refinancing what much she do must she sell her house or must she sell a house because she said since the property is used as collateral she cannot explain why she was declined so what's the best approach in that one you know there's a joke that goes around banks only lend money to people that don't actually need money so you know yeah you know it is unfortunate that if if you find yourself in a position where you are tight or your credit score is bad you are gonna struggle to get financing or to refinance a property and your first priority well I mean if you can't afford it then we now start to talk about what's the next plan but you'll only be able to refinance or get new bonds if you have a strong enough or a good enough credit record so I always say in our seminars as well that a credit record my credit record is sacred to me debit orders are sacred to me I do whatever I can but a debit order cannot bounce in my books in my accounts and the same with my credit score I need to have the highest credit score possible because that enables me to bolt my empire to acquire properties to refinance when I need to refinance all of that but if you do find yourself in a place where you already have a bad credit record and many of us has been there in the past you have to look at can I get out of this without refinancing because you're not gonna get refinancing so will I be able to get through this and while I get through this what can I do to improve my credit record again and and to get a good credit score so that maybe in the future I can take out a new bond for a new property or refinance a property if that is not possible and you will not be able to afford the to to to work with a budget that you will have then obviously one would have to look at more extreme measures. Yaakuna our final question from our viewers at home comes from Pilani Lwiana who asks which way is, there goes my foot here, they ask which way is the best way when buying a property buy on your name or use a trust. We definitely gonna have to do a session on structuring as well. So a popular one I can see. Ask three people how you should buy a property and you will get three different opinions and I can literally speak for the next three hours about this question but I'm gonna give a short question or short answer that might not answer all the elements but it will give you a good guideline. The example that I always use is that if you have a business and you run a business through your personal savings account and your income is coming through your personal savings account your personal account your expenses is going out there and you are getting to a point where you want to expand that business and you want to get funding or financing and you want to bolt this business. Not a lot of people are gonna take you seriously because there's no structure, there's no professionalism to the approach of how you're holding this. If you've registered that business in a company in a PTY with its own bank account and its own financial statements and now you want to get financing or funding obviously funders and financiers will take you more seriously because it's more structured to your investment. Now why is it different with property investment? If you are holding a property portfolio this is your business and you need to run it like a business. So my advice always is to have your properties in an entity such as a trust or a company. Now if you really want to, if you really want to get different opinions, ask people whether you should be buying in a company or whether you should be buying in a trust and that's a very difficult question to answer. A lot of people say in a company but there are also people that say in a trust and in certain instances a trust often for people that are just starting out there are great opportunities like with a condit principle to buy your properties directly in a trust where you can distribute the profits and the capital gains to the beneficiaries which you can't necessarily do in a company but for me structuring is very important and if you are looking at building a property portfolio now I'm not necessarily talking about you just want to buy one property and you've got no intention of going further than that but if you do want to build a property portfolio structuring is very very important. Now I could before I let you go any top three tips that you'd like to give our viewers at home who are whether they're really in the property space maybe they're got two or three rental properties or they're looking to get into the property space right now what are the three tips that you would give for them especially seeing that we're currently facing historically low interest rates and it is fertile ground right now for property investments as you were seeing earlier that it's a biased market. Right so I want to give I want to give a couple of tips and something that I maybe want to do while we are wrapping up is I want to put myself in somebody's shoes that's maybe thinking of buying a property now or building their property portfolio and the question is what would I have done right now if I was in that position the first thing that I would have done is I would have put a plan in place what what where am I going to what is my direction what is it that I want to achieve and what are the steps going to be to get there because before I have that in place I can be all over the show and and and don't know where I want to go. If it was me I would have obviously said that I want to build a property portfolio and what I would have done that then is two things I almost want to say again to balance the scale I would have made sure I get access to as much cash as possible and make my cash reserves as strong as possible and I would have in the same breath looked at how many properties I can acquire in in a time such as this because prices are going to be very very good so to break that up into tips this sounds very bad I want to say prepare for the worst but but but that's very that sounds very negative but but what I mean by that is is make sure that you are prepared for some curveballs that might come your way if you are buying that does not mean property is a bad investment that that does not mean you shouldn't be buying property now absolutely I don't think there's a better time than what the next six or 12 or 18 months will show so but be prepared for some curveballs and what I mean by that is have some reserves in place especially if you are looking at investment property as well if you are looking at buying a home for yourself also a great time to buy property for yourself now but again be prepared and have a close look at your situation that you are in how stable are you is your income at this stage how is your budget looking how is your affordability looking the last thing that you want to do in a time like this is overexpose yourself and spread yourself to thin because the opportunities there like I said it's like a five-year-old walking into a five-story can five-story candy store there is so much opportunity out there there's so much that you can do now but don't spread yourself to them and and and what I mean by that is make sure you have cash reserves as you venture out and bought and and and acquire property so yaku's three tips essentially are put a put a plan in place and you're prepared for the worst and look at your financial situation so you can be best able to make an assessment yaku thank you so much for joining us this evening that is yaku hobula who is the managing director of prosperity enterprises and of course for more of these conversations you can always watch our Facebook page where we will be coming to you live every day during the every weekday during the lockdown at 7 p.m. bringing you experts and packing different property issues if you have any topics that you'd like us to cover do drop them below and we'll definitely explore them with our experts and of course we're rental sale and buying needs go to private property dot co dot zirei I've been your host is Amanda more come out of thank you so much for joining us this evening until tomorrow night