 So you spoke a little bit about how one can lock a price in by buying off-plan because they buy at a certain time and by the time they move in their property has already even increased in value. So I want to just know in your experience and in your opinion, do you think that this way of acquiring property is more lucrative or it's a good investment or a good way of increasing one's investments? Good evening and welcome to the Private Property Podcast right here on our Private Property Facebook page at 7 p.m. and it's a weekday where we talk everything and anything property. So we're talking buying, selling, investing. We're talking about how you can grow your property portfolio and grow it from strength to strength by using information that you get from our podcast. Thank you so much if you are joining us for the first time and for everybody else who's joining us on the Twitter Spaces. Thank you so much for coming through. Hopefully you stay to the end of the conversation. Tonight we are talking about something that if you are a prospective buyer and you want to go into buying property or you are a property investor, this can benefit you. So send this link to anyone who you think might just benefit from listening to the conversation tonight and we are surely going to have a good time. Tonight I'm joined by the area principal of Pam Golding, Gareth Bailey, who's going to be talking to us about is buying off-plan a good investment. Gareth, good evening and thank you so much for joining us. Good to me. Thanks for having me on the podcast. It's an absolute pleasure. So we are talking buying stuff off-plan, well, buying property off-plan. Someone might not know what we mean when we say we are buying an off-plan. Can you just take us through what the concept is and how it came about and how even you guys use it in the property industry to make sure that you drive sales and you allow people to get or give people an opportunity to get those properties. OK, so off-plan basically refers to the fact that you are unable to see the property that you're buying, so because it hasn't been built yet. So you have to look at the plans and all the diagrams, like the floor plans and the unit layouts and the pretty artist impressions to make a decision. So you're basically buying off-plan, so to speak. And yeah, that's where the term comes in. Sure. So you would say it's like buying online for property. Yeah, it's difficult because most people like to see exactly what they're buying, walk around, kind of touch the walls, see and feel the place. And that's not always possible. So you've got to really use your imagination at times. So good developers and marketing agencies help buyers to to feel comfortable by providing good quality artist impressions and as much detail as possible. Definitely, you already said that it's something that's quite difficult and maybe when you guys are selling properties or developments, this is one of the challenges that you get. Let's talk about what the advantages for a buyer when they are buying a property using this method. What are those advantages that they can outright say this is an advantage for me to buy using this way? OK, so in terms of good property growth, which, you know, varies over time. Some time ago, we had annual growth rates of 30 percent. At the moment, we probably got five percent national average in terms of property prices are going up five percent a year. But one of the benefits of buying off plan is that you put down a relatively small deposit today of, say, 10 percent and secure the property at today's prices, even though the property is only going to be complete in 18 months time. So you put down your 10 percent and you enjoy the growth of that property and price over the following 18 months. So from that point of view, it can be a good investment. Then another positive about buying off plan is that often new developments offer access to new areas that weren't available before. So new suburbs open up. It's literally like the letters turned on on a section of the map that wasn't there before. You can now buy property in this new area. And that's one of the benefits of buying off plan. You get access to these new areas and you also get access to new types of properties. So, for example, maybe typically there were only freestanding homes in an area and your development brings an estate concept or brings an apartment concept. So you have access to new types of properties in an area or completely new areas with new views and new outlooks. So often buying off plan gives you access to new and cool things that weren't available before. And then I've got one or two others here, too. Like when you buy off plan, obviously there's less maintenance because you're buying a new product that comes with guarantees from the developer. So it's unlikely that you are going to have to, for example, repair a leaking roof anytime soon. Whereas when you buy an existing property, you buy it foot to toe, you know, if within the first week of moving in that rains hard and your roof leaks, that's your problem and you may have to dig deep to get that fixed. So another benefit of buying off plan is that you get a new property and there are developer guarantees. There's also a snag period. So when you take occupation of your property 18 months down the line, you usually have a week or two to identify any issues that you find with the property and submit a report to the developer saying these are the issues that I've noticed. The shower door doesn't close properly. It's not closing flush. The hot tap is not working or whatever. And the developer would remediate those issues within a pretty short period of time. And then finally, one of the benefits is that you don't pay transfer duty. So when you buy a property, usually you've got to pay for the property. Plus you've got to pay for the transfer duty on the property on about a two and a half million round property. I think it's about 90,000 round on as you go up at escalates. I think it's about 250,000 round on four million if I'm not mistaken. Whereas when you're buying off plan, there's no transfer duty that you have to pay because it already includes fat. Yeah, so and one of the benefits of the fact that it includes that is that the bank is prepared to give you a loan on the full amount, including that. Whereas if you were buying off plan, sorry, if you're buying an existing property and you have to pay transfer duty, the bank only will consider financing you on the portion excluding the transfer duty. So there's a subtle difference there where effectively the bank is prepared to finance the portion, including your vet or transfer duty on the new development. Whereas with existing properties, you don't get that benefit. So you spoke a little bit about how one can lock a price in by buying off plan because they buy at a certain time and by the time they move in, their property has already even increased in value. So I want to just know in your experience and in your opinion, do you think that this way of acquiring property is more lucrative or it's a good investment or a good way of increasing one's investments? Yeah, I think that it is. You know, it depends what you ultimately want to do with your investment. If you're looking to try and just grow your assets and generate as much rental revenue as possible in the short term, then it's a better idea to buy as many smaller units as possible because you get a better rental yield on smaller units than you do on bigger units. But if you are buying a property as an investment, but with the ultimate goal of maybe retiring and yourself for the older folk, then maybe you would buy a bigger unit, even though it won't yield as good a return as buying more smaller units. So an example of that is if you are looking to spend two million rand on an investment property off plan, you might choose to buy two of them at one million rand and earn seven and a half thousand rental on each, which gives you 15 thousand rand in total as opposed to buying one two million rand unit and earning, for example, 13 thousand rand a rental. So you can see that you get a better rental return. Generally, rental yield on smaller or cheaper units is an inverse relationship between rental yield and the size of the property. Sure, no, definitely. Thank you so much. If you just joined us, we are talking buying off plan. If this is a good investment opportunity for you as a property investor, or if this is a way that you can break into the property market if you are a first time buyer, we are joined by Gareth Bailey, who is the area principal at Pam Golding. So we we've been talking about this and I really think that if you if you are looking at going into the property market, especially as a first time buyer, this really does sound like something that you would want to really look into and make sure that you have that information about it to ensure that you are making the right decision. So let's go into the poll of the day. Thank you so much for everyone who is also who is watching and engaging with us on the Facebook stream. Thank you so much. We really, really appreciate it. The question on the poll was what is your favorite room in the house? Since we're talking house plans today, this was this question is really fitting. So the first first option was my bedroom. Second was the kitchen or the lounge. And the first person who answered who was Matepiso Mosebi says, most definitely my kitchen. And Paisa said, I only love my bed and my mama. I'm sorry. So clearly people love different parts of their houses. And that is that is that is also very important. And I want I want to bring this, bring it in here, Gareth and ask what have you guys seen when people are coming to buy homes of plan? What are their priorities? What are the things that they're saying? This for me is a given. I this is what I want to see. If I'm not seeing this, then I'm probably not going to be convinced to buy. OK, so I think that what people generally look for is what, how many bedrooms they are getting for the price. So if you think about when you're young, maybe you you see on these these American movies about them trading baseball cards when they're young and each player has different characteristics. You we always talk about maximizing the number of bedrooms and bathrooms at each price point. So you want to have the best possible stats at every price point. And I think that's probably the most important thing that people look for. And obviously, there's a trade off between kind of having a higher, a bigger property at a higher price versus having extreme value at a lower price, but generally speaking, people buying off plan apartments are very interested in seeing, you know, trying to get it at the lowest possible price for the number of bedrooms and bathrooms that are available. And then other than that, I would say that that comment about the kitchen is great for kitchen and living area, being open plan, entertainment, access, the flow between indoors and outdoors. South Africans like to bribe and like to be in the outdoors. So, you know, to the greatest extent possible, that's something that's also valued. And then parkings is a big one, you know, to sell a unit without a parking is a tough one. And then to sell a two bedroom unit with one parking is OK, but it's nice to have the option for people to buy another parking to sell a three bed with one parking would be pretty difficult because if a family is living there and they have got more than one car, then that would be an issue. So I think those are some of the things that people look at off plan and then obviously the most the most cliched one, which is location, you know, choosing the apartment or the development of plan that's in the best possible location, maybe because of transport routes or whether it's sea views and whatever that may be. Thank you so much for that. You know, with COVID-19 and the way things have changed and really us not being able to do business the same way that we used to. What other technological advancements that you guys have seen or that you guys have adopted in this space that allows you to continue to be able to sell these properties of plan and to give people that same experience, you know, they were already going to be seeing maybe a brochure or a file that has these different plans. But now people are sitting in their houses and they can't really maybe even come to the office to come have this session with you or even go to the site. So what are those technological advancements that you guys are using or apps that you are using to show people and maybe even augment how these these places are going to look and, you know, really simulate how the place looks. OK, I'd like to say that we have virtual reality and augmented augmented reality available to us already, but we don't. We do have a couple of things that have come about as a result of COVID. One of them is Matterport, which you may have seen, which is that kind of aerial view and you fly into the building or fly into the apartment from above and you can navigate around the apartment or the property and go into each room and go out onto the balcony and look at the view. So that's one of the technologies that's been used during COVID. But specifically in the development space, buying off plan to give you an example, Pam Golding, Poptis has just launched York in sanctuary private estate, which is an FWJK development in Shlonga, a ridge side. And we have a web module that we've developed, which shows the exterior of the building and you can move your cursor over the floors and choose a floor in the building that will then zoom into that floor. And you can look at all the different types of apartments available on that floor if you click on a specific apartment that will show you the apartment's layout inside. And you can also click on a little camera icon to see what the view is like from that apartment from the balcony. So that is a tool that we are using to help our prospective buyers to feel, get a better feel for the property without having to come into our office or come on site. Thank you so much for that. Thank you so much for that. It's really great to see how we can now use technology to simulate these things and give people that sense of urgency because at the end of the day, it is an investment and I want to know that I'm making the right decision. And talking about it being an investment, how can one pivot the investment? Because we want to use this form of buying property of acquiring property as an investment, you know, or to increase a property portfolio. How can one use this to pivot that property portfolio? OK, so pivot, are you meaning how to maximise your benefit from? Yeah, so I think that goes to the point I was talking about earlier, which is, you know, if you purely looking at it from an investment and rental yield point of view, then it's often a better decision to buy smaller units, more smaller units than by one slightly bigger unit because your rental yield is better and cumulatively, you will be better off investing in that fashion. I think another thing to bear in mind is often there's a bit of a glut of stock when a new development registers and the purchases take occupation because suddenly you've got 100 or 150 new properties that are on the market and many of those owners may be looking to rent them out. Some of them may be looking to flip them and sell them. And you don't want to be average. You don't want to be like all the rest of them. So you've got to try and bear that in mind at the outset and think to yourself, well, how do I differentiate my unit from the outset? Maybe you choose your location cleverly and you're on a corner that has a wider angle of use. Or maybe you choose to spend a bit more money to invest in air conditioning and air conditioning option in your unit. So these are the sorts of things that you can do to help differentiate yourself later if you want to sell or if you're looking for a tenant, because these small differences can help your unit seem better than the rest in the building. Definitely, definitely. And, you know, it's that little effort that you take as an investor, that little thought that you put into your units that makes it 10 times better and just already just mentioning that I'm thinking of the value as well. And I'd like to really not pose that question to say, will it increase the value of that particular property? Because I mean, if these properties were all bought on plan and there are some minor innovations or minor additions that you put to yours, does this ultimately increase the value of the property that you bought off plan initially? Yes, I think it will. It will definitely because people perceive value in things that they don't have to go and spend money on if they were to buy a property because it's already included, but also because it compares favorably with the other properties in the development. And it comes down to supply and demand. You know, if there's lots of supply, then relative to demand, then price is not going to be strong. But if you manage to differentiate your unit so that there's not many other units that are the same as yours, then you can demand a higher price and get a better return on your investment. So you want to be thinking up front when you're buying, how can I buy a unit that is different to most of the others? How many of this type B2 are there in the development in this position? Because I think it's really nice. Oh, there are only three out of 50. OK, you know, that that bodes well for your ultimate return because you'll be able to differentiate based on that, as opposed to being one or 50 that are all the same and not differentiated in any way. Then you're going to be kind of in the same bag as everyone else. Yeah, I'm sure the biggest question in any investor's mind now who watches our podcast regularly is what are the disadvantages? What are my risks? What should I look out for to make sure that if I'm going to invest in something like this, I'm guarded against those risks. I'm able to mitigate them. And if there are any disadvantages, I'm able to navigate them seamlessly. So please talk us through the advantages of acquiring properties of plan. Some of the people who are watching and who are following on Instagram are mentioning some of the things that they have gone through, and I'll feel them quickly, but just give us those ones that you know in terms of the industry, in terms of the way things are set up. What are the disadvantages that come with buying and a property of plan? OK, so I would say that the main risk and disadvantage of buying off plan is that your money gets tied up. You pay your deposit, perhaps you secure the balance of your purchase price. And then the development gets delayed for a year or two longer than it should have. And you want to get out, but you can't because you're locked into the agreement and you have to wait out that period. So, you know, the way to deal with that risk is again to make sure that you choose a developer that has a strong track record of delivering on time and to specification. And, you know, in fact, that's singularly the most important thing. If you choose your developer first and then look at the products that they've got available, that's almost more important than finding the lovely looking development and then only considering the developer, the developer comes first. And then the second thing is the price can be higher sometimes relative to what you can buy in the in the existing property market. And that's because construction costs and steel costs today are more expensive and it's more expensive to build a house today than it is to buy an existing one. So developers are under immense pressure to get all their construction input costs and develop the property and bring it to market at a price that buyers are prepared to pay today. So what what you find is that the prices can be a bit higher than what you can get, but then you are getting a new property off plan. So it's higher price. Let's see what else there is. Oh, yeah, you you don't see what you're going to get. And that's a biggie for a lot of people. There's risk in standing there trying to imagine one, what your property is going to look like inside. Two, when you walk out the door and onto the balcony, what is your view going to be like? Is are you going to look straight into another unit? Are you going to have a view out over the city or out to sea or over the coastal forest? And these are the things that you've got to be careful of, because if you bang and. From a yeah, if you if you're not careful, you can end up with something that ultimately is not great. And by that stage, it's been transferred into your name. So if you choose a good developer, they often offer quite a high level of confidence that you're about what your property is going to look like inside, what your views are going to be like. And many developers will even give you an angle of view. So they may say you will have seventy five degrees sea views or 90 degrees sea views from your balcony or 180 degrees or 270 degrees if you're on a corner unit. And it's quite nice to get that material from them because if they put it in writing and give it to you, then they should deliver that. Thank you so much for that. And it's very, very important that as an investor, you know, you look at those risks, look at those cons and see your risk appetite to see if you are willing to actually go into it. We I wanted to wrap up now because our time is well spent. And in us wrapping up, just give overall advice to someone who wants to go into the market, someone who maybe wants to get more property. What are those things that you would? Well, what is that advice you would give someone who wants to get a property this way? Are you talking specifically off plan or? Yes, off plan specifically, yes, off plan specifically. I would say if you just getting started, I think that you need to firstly spend less money so that you can save for your deposit. And remember that although you don't pay transfer duty, you're still going to have to pay transfer costs to the convey answer who's going to register the property on your name. So you need to make provision for that. And I think just bar within your own means. I think a lot of young people who are starting out in property investment or buying their primary property, even try and bar the biggest fanciest property that they can afford. And that's not always the best strategy. Sometimes just tempering your expectations in the media term and buying something that you can afford, something that makes good financial sense and then perhaps saving to buy another little unit that you can rent out is a good option. And down the line, you can always sell one or two of them and then invest in something a bit smarter. But just to be prudent and take baby steps and I think you'll be surprised how quickly that can roll up. Definitely, definitely too important to look out for. Thank you so much, Gareth, for joining us and really, really sharing those insights with us. We really, really appreciate it and have a good evening. You're welcome. Thank you to me. Thank you so much. We've reached the end of tonight's episode and we were talking about buying off plan. And if this is a good investment, then I think after that episode, you will agree with me that it is a good option to to to consider when you are looking to either increase your property portfolio or get into the market or even to really just start getting those properties. Thank you so much for joining us tonight. And yes, we are counting down to five hundred episodes right here on the private property podcast. So doing so that you share the link with your friends, your family. Make sure that when we are talking property, they are here to hear what you are hearing. Thank you so much for joining us tonight and have a good evening.