 So as somebody wanting to be practical, you've got to know where most people like to live, location, location, and I'll punt it as much as I want to. Location is important. Good evening and welcome back to The First Time Homebuyer Show. As you know, I'm the host, Esti Klaasen. This evening I am chatting to Cabello Chiroa and we're talking about do we rent or do we buy? We've all been challenged with this question. Tonight we find out exactly what we should do. But before we get to the show, I would like to remind everyone that we do have amazing content coming to you live every weekday this week. But without further due, Cabello Chiroa is with me this evening. Good evening, Cabello. How are you? I'm good thanks, Esti. How are you doing? Can't complain. So apparently in Santone you go by the name of KB. Yes, yes. Most of the time on the phone. Most of the time. Absolutely. Thank you so much, KB, for joining us this evening. Just before, you know, behind the scenes, you and I, we were chatting and you said something. Cabello, you said that people are not practical when buying property. Big statement, KB. Let's hear a little bit more about that. Well, essentially, Esti, you know, the reason why some people are not practical in what they're choosing is they don't have the fundamental idea of what exactly they're looking for. They want something modern, but they don't choose the area. You know, they want something practical in order of investing and they don't choose the correct area. So that's exactly what I meant. So what essentially happens if somebody decides to buy a place, let's say for example Pretoria, but they choose the other side of Pretoria, the end of Pretoria, and then they think that investment return will come back to them. Essentially, it doesn't happen that way because areas change, you know, areas change. People come in that are not of a certain caliber and they can destroy an area. So that's what I mean by practicality is very important. If you want something modern, know where you want modern. Have the budget for modern because it's very important. It's essential. Because I was about to ask what would you say are the tools or skill set that a young investor would need to have to have this practical mindset? Location number one and have an idea as to where most businesses are going or headed to. Santin is a business hub. It's known as a business hub. People like to live in Santin, work in Santin. However, Santin has its drawbacks. It has its drawbacks. So as somebody wanting to be practical, you've got to know where most people like to live, location, location, and I'll punt it as much as I want to. Location is important. I'm so excited to have you on the show because one of the important or something that I've also been, you know, like an internal battle with myself is do I rent or do I buy? And ladies and gentlemen, that is the topic of this evening. Do we rent or do we buy? That is my question to you, Katie. What would you suggest? Buying if you want to invest. Renting if you're thinking of relocating. How do I know if I'm going to relocate? Well, it depends on your job, what type of job you do. As you have seen, I'm sure you have noticed that in this time and era of 2020, 2021, we have seen a lot of people going online. Other people are downsizing. Others are deciding that you're not a kind of for the rental anymore. So what's the best way of doing it? I decide to go home. I live with my parents and then restart again. However, though, it doesn't end there because not everybody has parents to move back to. Let us remember that. Others actually think about, you know what? I can't pay this rent anymore. It's too expensive. My salary, number one. Number two, if I want to buy a property, I need to look at various factors. Yeah. You know, one of those factors is my income, you know, location and can I afford it? Because most people, when they buy a property, they don't know that it's a lifetime cost. Right. It'll cost you on levies, it'll cost you on water, cost you on lights, you know? And there are other costs that come into a property as well, such as maintenance. Right. So it's something you've got to consider. Buying, you've got to know. Maintenance, water, electricity and levies. And because we even just spoke about that a few weeks ago is especially as first timers, know about your levies, know about all of these other hidden costs that come with this. What would you say, KB, are the advantages of buying? So number one, advantages of buying, you have an asset that appreciates. Number two, as you live in the property, you get to enhance the property. So you change it from a certain state as you go with the years and you can also use it as an investment property, you know? Not forgetting, if you cash trap one day, you can sell it off. But be ready, you know, because there are people who are willing, you need to be ready for the people that are willing to buy. What is a willing buyer willing to give you, you know? Be prepared, because there's going to be negotiation, regardless of what happens. Of course. You know? So most people aren't ready for that. They believe that, look, I'm set in my price, my price is set in stone, and I want how much? I want this much. However, though, you get to a point where you don't get that much. Then what? It's either you take the price or you wait a bit, you know? Or, you know, I take it off the market. Right. If it's not selling at your price, take it off. And then just live with that. And live with that for a period, and then bring it back up. But also think about your price, because somebody can offer you 2.8 million, but that 2.8 million offer won't stand for too long. They will go eventually and find something better, even better, you know? Would you say that there are some advantages of renting? There are some advantages of renting. You wait, you know? You can also put money away, depending on your salary as you're renting. But also it must be a rental that is cost effective. It doesn't eat away at your bottom line. It also doesn't eat away into your savings as well, you know? There has to be enough money left over. Then you know that your rental is pretty much successful. If at the end of the month, after paying rent and all these Jews that you've paid over, you don't have money left, you can't really say it's an advantage. It becomes a disadvantage. Because what happens when you pay the landlord short becomes another problem. Exactly. You know, you can either put you into arrears and then you find yourself one day, he says, please, can you leave my unit? Sends you a letter. We're talking about arrears and all these financial implications that come with either renting or buying. Absolutely. Because it's a tricky time right now. But so I have a question for you, which another guest brought up quite often in his show, is everyone has a different perception of debt. What is your perception of debt, KB? There's good debt and there's bad debt. Of course. So my perception on good debt is good debt can take you very far in terms of purchasing assets, building your asset portfolio and so on and so on. Bad debt, however, can put you into a funk mentally, emotionally. And it can take a toll on you. That's bad debt, you know? What I mean by that is if you are cash-strapped and always in the red, you are not able to function or be able to purchase any assets because you're constantly trying to catch up. And the catch up game doesn't really work. It puts people into a corner. And when someone is backed up into a corner, they tend to retaliate. But not always in a positive way. But it also depends on the character as well who's purchasing. But if you find yourself in arrears, make sure you're able to at least consolidate the arrears. Make sure you catch up as much as you can. And then from there, you can start to build again. I mean, if you can, you also need to be realists about this. And then I wanted to, because these are like three, this is like a three-in-one question. And when you went through them, you giggled a bit at this question. Is there a right age to buy property? Not exactly. You can buy a property if you have the financial means to buy a property. 20-year-olds are buying properties these days. Some of them are getting money from inheritance and they're buying properties. Do you think that there should be a level of maturity that comes with whether or not you're buying for investment purpose or just buying? So like example, do you think that a 20-year-old can sustain this property? Do you think that they're able to manage this property? Yes, cool. They just got a lump sum of money and they just bought property. But mentally, do you think a 20-year-old is ready to invest in property? Not always. Your personal opinion? Not always, not always. As you all know, with maturity comes responsibility. Now, or we can put it vice versa where we say responsibility leads you to maturity. You'll find that most 20-year-olds are not ready for it, but other 20-year-olds, because they've had to grow up quicker than expected, they tend to understand these things better. So background has a very big play into responsibility, especially at an age of 20, when you're purchasing your first property. Yeah, exactly. I wanted to find out, because I just want to get a little bit more technical about this. What factors should one consider when renting? Let's start with renting. So most factors are what do you really want first? Are you looking for a two-bedroom, a three-bedroom? Or what will suit you best? Once you've understood what will suit you best, you'll then move on to the price bracket. But most people say, let me look at price first, and then I'll look at those other factors later. But you're looking at your price, and then you move on to location. How close is it to the amenities? Malls, highways, schools, hospitals, these are things to also consider when renting. Because in a time of an emergency, you need to know exactly where you are. Because most people, when things like that happen, they don't know where to start. So when it comes to renting, your factors are, look at what you're looking for in terms of size. Are you comfortable in the space? You see something online, it's at 6,000 rand, it's a studio. Literally your lounge is your bedroom, your bedroom is your lounge. And because you saw the price and you saw its location or sentence, you quickly run to it. And then only when you're in the space then you realise, wow, I made a mistake here. This is actually too much for this. It's too much for this. It should be less than this. I went with a friend the other day, sorry, quick personal thing, to look at a property. And I became such a Karen in this situation. So literally two blocks from where you just wanted to rent, top buying, but still we need to consider these things. And they were busy building, developing a new mall. And I became such a Karen and I was like, but God, you know, there's this thing is happening here. I just see a whole lot of bricks and sand. What does that mean? Like, am I going to be, am I going to take this place rented for the next couple of months until I'm ready to buy or my friend in this case? And then I'm going to be hearing all this noise because there's a new development coming up. And I think this is so important because one of my biggest thing, a lot of people come to me and they're like, hey, I'm looking for a place. What question should I ask the estate agent? I mean, I'm not, I don't know at all. But one of my key things is what is happening? What are the upcoming things in the area around you? Cool. It could have a great mall that you like. It's close to work. But what do, should agents know what's happening in the community around this property that I'd like to invest in? Yes, it's very important that an agent knows exactly what is happening, you know, because things like safety come up. Is it safe to be here? You know, if I had to walk down the street, could I, you know, get to the mall on time? What time does the mall close? What time does the hospital close? What are the rates at the hospital? What are the rates at the nearest school? You know all these things? You need to know these things. You need to get to know these things, know your area, you know, practice these things, ask questions as much as you can, so that when the client is standing in front of you, you're able to transmit information over, you know. But basically what's the most important thing is to build a bridge, build a rapport to the client, you know, because as soon as you understand what the client's needs are and the client's wants, you're then able to answer each and every question. Because then you go out and do your research and find out who's ours. 100%. And I think what's so important, especially for young people who are now, you know, working from home and ready to go and find their own apartment, get out of, you know, mom and dad's house, what are the important questions that we should be asking people like you? So basically, what are my rates, taxes, levies and so on and so on? You know, because these are your costs that will sit with you for life. Yeah. As long as you own that property, for as long as you own it, you will have these costs running up pretty much. Yeah, yeah. You know? So I think that's the most important thing. So that you at least have an understanding that on top of your bond that you'll be applying for, you already have an idea, a full package of it's going to cost me 9,000 Rand, for example, to literally run this property. Right. You know? Then I can only think about the profit that I make after I've taken away the 9,000 Rand. For example, once again. So it's all dependent on number one, price. How much is your bond going to cost you? And what are your running costs of the property? What I mean by running costs? Water, lights, levies, rates, taxes. A KB. So we talk a lot about these investments and it's so key for young adults to know what questions to ask. And so thank you for sharing that. Would you say one could ever make a bad investment? Yes, it is possible to make a bad investment. And you can only learn from that bad investment when it goes south. Yeah. You know, you can never actually predict. However, though, I mean, looking at an area and looking at the type of people moving into an area, for example, would be a factor to say, okay, you know what, slowly but surely is deteriorating. So you make two choices. Do I leave this area? Do I sell now? Or do I wait? But also remembering that the longer you wait, the worse the investment becomes. Yeah. You know? Or you could find yourself in a situation where you have tenants that run up bills that are so high and evicting them becomes a problem eventually down the line. And then it becomes a bad investment because now you have to look at legal fees. You've got to look at going to the courts to have eviction orders done, getting the sheriffs in there. Yeah. And then you know that, you know what? This is costing me more than I'm actually making from the property. Have you seen this happen to people around you? Yes, indeed. I've actually experienced it myself. Oh, wow. Yes. Let's talk a little bit about that. Alrighty, so I had a tenant. He lived in my property for about four and a half years. The first job, it was okay. The second, he stopped paying. And then it was always a promise, off the promise, off the promise. Eventually, he ran up a city of Johannesburg, rates and taxes, water lights. He ran them up to such an exorbitant amount. I was unable to repay it at one time, at one go. Eventually I had to get the sheriffs involved. It went to court and that didn't really work. So he actually left on his own volition. So he stood up, he said, you know what? I'm going. But every single month it was a promise, off the promise, off the promise. And I've been through that experience. I've seen it, I've experienced it. I've also had water and lights turned off by the city of Johannesburg. How do you come up from that as a property investor? Well, the best way is to cut your losses, you know? Know that the legal route is not always the best route. Right. Unfortunately. Big statement again. It might not always be the best route because it takes long. It's a long process. One needs to understand that some tenants will stay. Some tenants know their rights and they will stay in a property regardless of what you send through their way. They can even tell the sheriff, no, we're not leaving. Then the sheriff now needs to move to the next step of involving the red ants. There are situations that happen like that. But that's a very long and prolonged process. So it gets to a point where you need to now, number one, have the mindset that look, I've lost, let me consolidate what I have. Normally the deposit that is being held in security might not cover the cost. But as an owner, you might have to hold on to that. But then. Exactly. It's all about communication. I wanted to find out for me, because being an estate agent, would you say that that has helped you on your property investment journey? Like learning more, seeing all of these things happen in front of you. It doesn't only happen to you, I'm sure you hear about all these stories on a daily. It definitely has. I think it's made me more wiser, especially when it comes to property. It's also woken me up to the fact that anything can happen. You know, anything can happen. Things have happened where an offer was done, property was about to be registered, and then on the day of registration, the owner dies, the new owner dies. Now the property now belongs to an estate. So an executor must be now involved, taken from that point to the next point. The new owner, or the old owner, now has to think, okay, I can't get my money until the estate matters have been resolved. You know, so things like that can happen in a property transaction. As most people know, it takes three months for a property to be registered with the deed's office. But that's not always a guarantee that in three months it will be registered. Would you say that, so you said you would need to be practical in investing in property. Would you say that your investment, your property investment decision, you were practical about it? You have everything in the bag. Or are you also learning every day about property investment? It's a learning process with property investment. Nobody can ever say that they're a guru because everybody needs to get burned first in order to understand and learn from that and grow from that and then eventually improve. As I'm sure most people know that in Santon, the property buyers that come into Santon have numbers in mind. They want to know, what is my return on investment? How much am I getting for this property that I'm buying in Santon? Is it a worthwhile investment? And they're crunching numbers. Now the average person living on the other side of Limpopo is thinking, I don't need to crunch numbers. I want to place where I can put my head, be okay, have this environment that I call home. Home, yes. What is home to you? Home is a comfortable environment, number one, an environment I wake up to every single morning knowing that I am happy to be here. Yeah. That's what I consider home. I love asking that question on my show. Sure. Because I always, because we always talk about property investment, which, you know, as a guest said a few weeks ago, that it's this concrete thing you can feel that you're in it. And for me, I feel like house and home are two different things, right? And that's why I just, I wanted to hear your opinion on what home is for you. When I go home, I want to know that I'm going into my space. Yeah. You know, I'm enjoying my space and I have a chance to think in my space. Yeah. And that's what I consider home. I feel like there's this thing about my space. It's mine. It's my space, you know? You know what I mean? Oh, exactly. I like that. I want to have a little bit of a case study for you. Okay. And this is an important question because a lot of people, young graduates, could be in a similar situation, but let's take a waitress, for example, right? She earns 5,000 rand, or he, sorry, he or she earns 5,000 rand. And obviously the tips vary from month to month. Could a waitress with a fixed salary in that tax bracket of 5,000 rand invest in property? They could. However, one of the ways that, because it is a bit, it is a bit low, must be frank with you. So what would then have to happen would be all, she would have to ask a few people to join her, in purchasing the property. So let's say there's 10 of them earning the same salary, if they're willing to divide their monies together, or contribute, you know, then they can buy property together. And then at the end of it, once the property is bought, they get a tenant involved, then the tenant is paying monthly rental, each one gets a share. Up until they're able to now purchase the next one. So they can use this one as collateral to purchase the next one. And then so on, and so on, and so on, and so on. Purchasing the next one, you mean as an individual now? It would depend. Okay. If they are now able to. To obviously, yeah. Yes, you know, because unfortunately, when it comes to property, money speaks. Yeah, of course. The money is the one that speaks to you, because the money will determine what price range you qualify for, you know, where you fall into. And also your affordability is very important. Are you able to live off after you've paid for your property, you know? Or are you not able to do that? Yeah. That will be another factor that one has to consider. Exactly. You don't want to be in a position where you're choosing to pay for the roof over your head or the food you're about to eat. 100%. Yeah. And I think that's so key, because I love the honesty, you know, that, yes, 5,000 is a little bit of a, it is minimum wage, it is quite a little, but you're right, get together in a group. We often talk about property stock falls on this. Yes. And that is key, you know? But, and then what comes with that, you know, there's just like all these big decisions to make. What comes with the property stock fall is as a group trusting each other, because all of these other things come into play when you're in a group, whether it's family or friends, you know? So that's also very key, and I feel like a lot of you should take that in mind. I asked a guest a few weeks ago about their purpose as, what is, as an estate agent, you've been doing this for 5 years now. What would you say your purpose is? I enjoy, and I must be frank with you guys, I really enjoy the smile that you put on a client's face. Number one, to a fact that they say, you know what, thank you, thank you very much, you're good to go. Once you get that satisfaction, I think, you know, to me specifically, I, that's what I tend to enjoy, you know? So the purpose is putting a smile on somebody's face and also providing that home, you know, that right home where somebody says, look, put, I like it. I'm enjoying the space. Thank you very much. Right. You know? Do you maintain that relationship after? Well, it depends. You also don't want to be too, too forward or getting onto somebody's nerves, thinking that now we're friends all of a sudden. No, you've got to measure it slowly, but surely. So after a couple of months, you'd give them a call, hey man, everything okay? How's it, ma'am? I just wanted to know, are you guys still enjoying your space? Right. However, with some other clients, you do lose contact almost immediately. And that's the way of life, you know? People come, people go. Agents come, agents go. Right. You know, everybody's different. Yeah. You know? You might not like me. They might not like me. You might not like me. I might not like the other agent. Right. But you know, it is people that are communicating with one another for a set period. Right. You know? So I come with that understanding that, look, not everybody's going to like my service. Not everyone's going to appreciate what I do. And that's okay. I've understood that. We're all human. Yeah. You know? So KB, my final question to you is really about, and because being, you know, an estate agent and a property investor, and I've heard a little bit about your property and basement goals, and they're just growing more and more. So we don't need to go into depth about that. I feel like I should have you back on another show and we can talk about those goals. But what I would like to ask you is, what is financial freedom and generational wealth? What does that mean for you? Financial freedom and generational wealth. That would be leaving a legacy. You know? Leaving assets that are more than enough, you know, and enough also to support. Right. You know? Because you do get a point where there are family members that need a place to stay and instead of them renting, you could always say, look, use my apartment for a couple of weeks. I'll be happy with that. Find your way and then move on from there. You know? But ultimately, you want to be able to leave something that is tangible enough to take forward and continue growing as well. Right. Yeah. And financial freedom. And financial freedom. That would be being able to purchase a property at any time. Right. You know? Being able to walk into any environment and say, look, I've got the equity. I've also got the liquid cash. I am willing now to purchase this place. You know? I like that. Thank you so much, Kibi. And I feel like that's exactly what we as young adults need to start doing is or start figuring out how do we start creating the space for us to be financially free? And one of the best ways is definitely property. What do you think? Yes, indeed. It is one of the best ways and it's one of the proven ways as well. But not everybody believes in property. Right. You know? Others believe that they need to rent an asset and move on from one place to the next. To the next. You know? Obviously, depending on job as well. You know? You have job migrants that move around everywhere around the world. You know? And they believe that I don't want to be set in stone in one place. I want to be able to move around. Right. Now, the reason why some people also purchase properties is because not only do they want to stay in the property, but they just want to have that one. One, yeah. And that's it. They don't want anything else. You know? They would rather put their assets in stocks. I mean, money in stocks. Yeah. You know? In cars and all of that. But they prefer that way. Right. You know? And I guess, you know, each today. Absolutely. Thank you so much, KB, for taking the time out and spending time with us this evening, you know, and sharing your story. And also educating us. One more thing which I think is key because again, this is the first time homebuyer show. Maybe one lesson learned or one piece of advice you choose. Either lesson that you learned to a piece of advice for a first time homebuyer. A piece of advice. Sure. I think that's the best one. Piece of advice would be when you purchase that first property, make sure you know everything you can about that property. Everything you can. Find out about the levies. If it means speaking to the neighbors and questioning a neighbor, don't interrogate the neighbor. Question the neighbor. Yeah. How are things in this estate? How are things in this complex? How are things in the area? Yeah. You know? Somebody will give you a very open-ended answer. Right. You might not get the answer you want, but it's an open-ended answer which will either make or break the deal. Right. So it will be up to you in terms of what you ask, you know, but most importantly, how much is it going to cost me? Because it's a lifetime investment and with a lifetime investment it means every single month. Exactly. It's going to ask and demand for money. Exactly. Yes. And we need to be ready for that. And we need to be ready for that. Thank you so much, KB. Thank you, Estie. Ladies and gentlemen, there you have it. That is key. Know everything about that property. As first-time homebuyers, we need to try our best. And research is pivotal. Take care.