 Good evening and welcome to episode 264 of the Private Property Podcast. I'm your host, Uzaman Dunwoa Kumalo. It's a Friday edition of the Private Property Podcast on this very freezing Joe Burke evening. I do hope that you're staying home. We are warm. I know that load shading certainly isn't helping with the drop in temperature, but we are of course tuned into the one show that you can count on to bring you the latest in property matters and also, of course, help you navigate your property journey. If you join us for the first time, you have been missing out on great episodes, so do make sure that you go to our social media pages, particularly on Facebook and on YouTube, where you can catch up on all the great episodes that you have already missed out on. And to our regular viewers, you know how we do it every single weekday. At 7 p.m., you and I have an appointment where we tackle a hot property topic that helps us make better property decisions. It doesn't matter whether you're a property investor, whether you're looking to buy, to sell your landlord, your tenant, or of course, even looking to build. This is the only property show that certainly caters to all of your property needs. So this evening, one of the things that we're going to be looking at or certainly what we're going to be exploring this evening is something that's in line with a lot of what we've explored this week. And I think a lot of the property investors in particular are probably excited about some of the themes that we've covered this week. This evening, we're going to be looking at the steps to take before you start your property investment journey. And the reason why we're starting, you know, we're having this conversation about what to do before you start is because, of course, yesterday, the Reserve Bank decided to keep interest rates as they are, as many of us are, you know, to the relief of many of us. And I think one of the things is they've been some people who are interested in exploring property, but still haven't been quite sure what to expect, how to best prepare themselves to be able to do so. And I think one of the things that they've obviously been doing is watching the show, making sure that they're also up to date with the Reserve Bank's decisions when it comes to the repo rate. And I think one of the great things that you certainly would have picked up from the show is you want to make sure you understand what you're going into. You don't just want to jump into it because everybody's saying we're in historically low interest rates period, therefore you should go for property. You want to be clear what that even means, right? And we're only going to be exploring that this evening. But before we get to that, you know that you can also catch other shows that we have across our private property social media platforms. As it is a Friday, Chad is going to be profiling a fantastic home later this evening at 8 p.m. on the Home Shoppers Show. I know that is going to be looking, I think it's a 10 million round property. And I keep saying to many of you at home, one of the great things about, you know, the Home Shoppers Show is that it gives us a snapshot of what is possible for those of us who probably has had aspirations to owning such exquisite property. And you can also catch them on a Monday at 8 p.m. on the Home Shoppers Show. And every Tuesdays and Thursdays, a warden and farmer, Ombalino, what brings you the farming podcast where she always tackles issues that are all things agriculture and it doesn't matter where the agricultural landscape you have an interest in, that is the show that you want to make sure we're always tuned into to get the latest on farming. And on Wednesdays, Estie Carson brings us the first time home buyers show, which is always in conversation with people who've gone beyond buying that first property and growing their property portfolio from strength to strength. Well, I think one of the great things certainly going from the type of show that Estie would have is that in the event where you want to be the kind of person that can be profiled in that show, this is the podcast and certainly the episode that you want to be plugged into as we explore the steps to look, certainly the steps to take before you start your property investment journey. And we've brought back on the show, somebody who needs no introduction, Laurence Bull, who is a property coach and an author to help us make sense of what is possible for us and what we should get right the first time around so that we can avoid mistakes that are certainly going to cost you a lot of money and a lot of time. Laurence, good evening and thank you so much for joining us. Hi, I'm Tom Gore and thank you for having me once again. It's it's only such a pleasure to have you on the show. Now, Lawrence, I think they're a really good starting, you know, point. And this is a question that a lot of my guests this week have have answered is around the sort of sort of financial, even mental research and preparation that one needs to go into when they want to go into property investment as a strategy because I know many people would have different asset classes that they invest in, perhaps properties, one that you're also interested in, when somebody knows that they want to be able to work with this asset classes, certainly grow their portfolio, what kind of mental research, but also financial research, should they be doing on the onset? Because I think with many of us, and we'll get to this part later on, Lawrence, is you kind of went in and did some of the research retrospectively. So we want to save people some of the pressure points that we went through in our earlier days. Sure. Yeah. Well, let me maybe start with the financial side. I think that's so key because property is quite a capital intensive asset class. I think that the amount of resources, specifically your financial resources will determine what kind of strategy you can follow. You know, if you've got let's call it a hundred thousand rent, you probably have the capacity to do a buy to let where you can get some bank financing to be able to purchase a property and you put down the down payment and bond and transfer costs. With that being said, you obviously have to have a good salary, a good credit score, and you need to get pre-approval from the bank. So as long as you've got a decent salary, you've got a hundred thousand rents saved up by to let would be the strategy that I would probably have directed you in. If you've got maybe a bit more somewhere around the range of 500,000, you might look at something a bit bigger like a student accommodation deal where again, you can get some bank financing, but you'll need a little bit more of a substantial deposit and buying costs. Usually the deals are bigger and also the banks might not give a 90% loan to value, they might give an 80% or 70% plus you might have to do some renovations to make it ready for student accommodation. If you've got more on the million to two million mark, that's when you can start doing multi-lets and blocks of flats. The reason I say that is because banks don't usually or traditionally like to touch multi-lets that are on one sectional title or one title deed. Only once it's sectionalised into multiple sections, will they then provide home loans? So I think when you're looking at what are my financial resources, that's going to dictate what your potential strategy is that you can look at investing in. And I think when I look at what you've just highlighted, the lines, we're going to get to breaking it down slightly for the years at home, especially those who are still in the early stages, because I know that there's some people, for example, who may have aspirations of owning that block of flats, but don't quite understand what may go into raising the capital. Never mind running and managing the building. I think that bit you can almost afford to not know too much about it. There are always various companies. I mean, I say almost, I say almost. I reluctantly say almost because that in itself can easily be a red flag if you don't manage it well. But then, Lawrence, perhaps let's go to when you've been you've been doing property for a bit. I've also done it. I often share some of my mistakes with viewers at home. And I'm keen to hear from you what would be some of the things that you wish you knew when you were starting off on your property investment journey that would certainly help people who are looking to get into property investment right now. I mean, I have a list longer than my arm when it comes to what I wish I knew then. And sometimes knowing too much could easily make you reluctant to go into something. So I think for on your end, what are some of the things that if you were to start at this point, you're like, this is some of the knowledge that I have, whether it's because you are attending seminars, but some of it is because you have your skin in the game. You've actually done this. You've seen deals gone right and deals gone wrong. Yeah, good question. And I also have a list as long as my arm regarding that. I think that the first thing is rather put in a few lower offers and get a few no's. I think my first investment I did because I was really desperate and I really just wanted the person to say, yes, I offered full market price. The reality is that when you buy at a discount, you buy equity, you reduce your risk tenfold by getting a 20 percent discount. Now, it's not easy. Obviously, you have to go through a couple of no's and find a motivated seller, but you tend to get a much better deal. I have the second thing I would say is it needs to make financial sense. Don't make an emotional decision. If you walk into the house and you love the view and you love, you know, the location and you can see your kids growing up there, then buy yourself a house that you're going to live in, but don't call that an investment. If you go into an investment property, it needs to make financial sense. The gross yield needs to be 15 percent plus. It needs to be cash flow positive, depending on the strategy, but you need to look at it from a lens of a financial perspective. And then I say the third thing would be to vet your tenants, whether you do it yourself or use a letting agent. I personally use a letting agent to do all of my management. But having a good process where you vet the tenants so that you you don't allow the bad apples to come in because doing the eviction and getting rid of bad tenants is a hassle. And it's not something that you want your time to be spent on. So rather pre-vet a good tenant, place the right tenant before, you know, allowing just anyone in. Those are beauties. I would say my top three. And I actually want you to elaborate a little bit, Lawrence, because the first the first one that you mentioned was the reality of just facing a couple of no's and trying to get in and certainly buy that first property or those first few properties at a discount. Obviously, you actually just want to be able to buy all of them at a discount. How would somebody go about the determining that they are getting this edit discounted rate? And the reason why I asked this is because having spoken to a lot of people who are aspiring property investors and some of them really bought a few properties but have not necessarily formalized their portfolio as far as their concern. They saw an opportunity, they buy one, they're renting it out and they buy a second one, they're also renting it out. I find that a lot of people when they do their market analysis and let's call it their market analysis, it starts and really essentially ends with going on privateproperty.co.zl, for example, seeing what the property prices are on the website, you know, going from what's the lowest and the highest in the band that they want or in the particular suburb that they want. And you and I know how dangerous working like that is and how for the most part, it just doesn't constitute market research really. So how would somebody didn't know? Because I think we mustn't take it for granted that people would know the different avenues that you should go to, to even see that you're buying or potentially going to be making an offer that's a discounted offer. Sure. Yeah, great question. The reality is what you see on private property is the asking price and the sale and the market price. It's not the market value. If you want to understand what the market value of a property is, you need to use tools, things like Lightstone and TPN or Windeat. I personally like Lightstone. I just find their interface to be a little bit more user friendly. But basically what Lightstone does is it takes information from the deeds office and it tells you what properties sold in that area that are comparable. So if you're looking at a three bedroom property in Santon, you know, you can pull the Lightstone report of the Santon suburb. You can find out what the last 20 sales were that were also three bedrooms of the same size, the same features, the same square meters. And then you can see what the actual market value is because the actual market value is based on what has been sold, not as what being presented on your or being advertised. Exactly. TPN is also a nice source. TPN tends to be a little bit more rental focus. So if you want to understand what your rental market could look like, I would use that tool, but definitely Lightstone tells you what the market value is and then you can work your discount price under that. And I think, you know, Lawrence, I'll add in one resource that I found. I think maybe last year, but it's been around for all just over two years now. My sense of timing is terrible because 2020 messed all of us up. So we don't actually know when last year is for many of us last year, it's still 2019, but I'll actually say the financial institution. So the Blue Bank has a really great feature that is look easy, where you're able to essentially go there to free service. It's on their website. So it's not something that's only available to their customers. And you essentially just able to go to that particular page and let's say there's a property, even that particular property that you're looking to buy. So I'm able to essentially put in the address of that property. It will tell you all the details that you need to know of that particular property, how much it was essentially bought for when the transfer would have occurred, the sales in that particular street. And sometimes even able to get data, for example, on a complex. So it will tell you in this complex, this is the state of that complex and how many units have been sold in that complex. But the price point in that complex is they even have, for example, a section that has crime data of the area. So it's a really to be great tool. It's free. You don't need to sign up or anything like that for it. Because I know that sometimes people make you sign up in order to be able to access that data. So I think that's just a really great this for desktop research purposes. If you just want to get a good sense of what's happening in the area, in the street, in the complex that you're interested in. I know that I've shared this particular thread around this feature, even on my Twitter feed, so you can go there and check it out. And I think those are some of the great tools that you're able to watch out for in the beginning. And this is something I wish was available when I started my property journey. Unfortunately, it wasn't available back then. The only services that were available, you had to pay for, you had to subscribe. And and and there's also just fear, right? Because you don't know this property thing. You don't know if you at certainly at the time, I wasn't sure if Lightstone was like this credible company. So they're all these question marks that we sometimes have. And certainly a lot of fear that we have when we go in. And then Lawrence, I think for years at home, then, how do we look at we've now we're now relatively clear of when it comes to where we want to be getting some of the knowledge, whether it's certainly from a mental perspective, but more than anything, the financial perspective, getting really good data for the property, the area, the street, the complex that we might be interested in. How do we then assess whether or not that's a good property, right? Because I think people, as you rightly pointed out, sometimes people go into a property and emotions take over. And they may think this is a great property just because it looks and feels good. How do we go about then assessing that this is actually a good property investment and take out all those emotions? Like, yes, the view might be great and the finishes might be fantastic. So what are some of the key things should we be looking out for when we assess whether it's a good property or not? Sure. Yeah. So essentially, there's two types of strategies that one investor can use to make money. You've got your buy and sell strategy and your buy and hold. Buy and sell is obviously you buy to discount. You force the appreciation up and you sell it here for a higher amount and you make a profit of whatever the margin is in between. The rental strategy is you buy and you'll hopefully your rent is higher than your monthly expenses and you're left with a monthly profit or cash flow. So I think whenever you're looking at a deal, you know, let's start with the flipping strategy or the buy to sell. You obviously have to buy it at a big discount or buy it well under market value. So you need to understand what that number is. You need to understand what your market value is. And then you need to understand what the difference is between the two, which is your renovation budget. How are you going to force the appreciation of this property? So if you buy a rundown property, it's going to cost you 200,000 to force the value up. Will it then be, you know, worth a million? OK, well, then I need to buy it at 700,000 because then I've got my 100,000 ran profit buffered into it. So when you're looking at your offer, you have to include your profit so that you know if I buy it at 700, I'm going to get this much profit from a rental perspective, which is a lot easier to calculate because you'll be able to see what the rent is, either through like a rent roll or some sort of signed lease agreement. You can see what the levies rates and taxes are the boundary payments. You can put some provisions in place for maintenance and for vacancies. You know, rental minus all of your expenses. Hopefully you left with something positive at the end of the month. And if you're not, then it's not really an asset, it's more liability. So, yeah, I mean, I think there's lots of free calculators and tools that my property app does it as well. But there's plenty of tools that one can use just to plug it into Excel and it will tell you yes or no, it's a financially good deal or not. And I like that you mentioned renovation costs and having a budget around renovation costs, that that's probably a factor that could easily be intimidating to particularly people who are starting off more often than I say to people that if you want to go into property investment, especially if it's the first time and you're looking at only doing individual units as opposed to going in with multi-layers or starting bigger properties, try to get something that doesn't need renovations. And if there's any kind of renovation, it's something as simple as paint, for example, nothing major at all. But the reality is different people have a different risk appetite, I guess, and different curiosities that they want to satisfy for themselves. So some will go with properties that require just slightly more work. How do we then help people or how can people rather assess that they don't overcapitalize? Because I've seen this happen quite a lot. It's probably easier for you to to be OK with overcapitalizing in a property when it's a primary residence so you can go with all the fancy finishes and you can be OK with it because you'd argue, listen, I'm going to be staying here for 15, 20 years, maybe more. My kids are going to stay here. But it's a completely different ball game, of course, when we're looking at investment properties. Sure. I mean, the first thing that I'd recommend is going spend an afternoon in Builder's Warehouse, you know, go check. What is a 20 litres of pain cost? How much does a tile cost a kitchen set? You know, a lot of us don't know how. Listen, before you even go anyway, when you just say how much 20 litres of, you know, pain cost, I feel as though I'm always buying paint and tiles and it's something I often complain about on my Instagram Twitter that I am forever buying those two items are the two items I am buying the most. I can tell you how much prices for both those items have been. Well, let's hear it. How much is 20 litres of paint since 20 litres of pain, depending on what you're looking for. You could easily part with a thousand rats. So it depends whether you're looking even like from a primer. So anything between 700 to maybe like a 1.2 is a good brand. Depends of course, what finish is an animal or is it a matte finish, whatever the finish is. But you're literally looking, let's sit at an average of about 850 for a 20 litre, you know, bucket of paint, which is, of course, gives me hard publications because that could easily be levies, for example. And if you're painting brand new, you might just need, for example, that to be the primer and you're still going to have the two coats of the primer and still have another 20 litre for the paint. So all these costs obviously stack up. But I sidetracked you there. You're talking to us about managing us overcapitalizing. Yeah. So I mean, it's great. You're like a great testimony, right? If you go and do a bit of research and you know what the costs are, you won't be duped by a contractor or a builder if he comes and says, you know, it's going to be $10,000 for this paint, you can say quite comfortably, no, that's not the case. So that's, I think, why, you know, if you're serious about property investing, go spend an afternoon or two in builders warehouse, understand what material costs cost. And then what I would say is if you're looking at a property investment that requires a lot of renovations, take one or two builders with, get them to quote to you. I would say get at least two quotes so that you can compare what they're costing you at if you can get three quotes. And then know what the material costs are so that you can see who's taking you for a ride, you know. And once you've done it a couple of times, I'm sure you feel this way as I'm going to go up, but once you've once you've done a few renovations and you know what to expect, it isn't as daunting. And it's actually you can start to estimate yourself with relative accuracy as to what your your renovation budget will be. And I think one of the things that I certainly picked up was there was a time when I worked with and I've worked with different contractors during my property journey. There is a particular contractor that I would say pretty much I want to say took me for a ride. The craftsmanship was fantastic, but when it came to the finances, definitely did overcharge me and this was at a point where I wasn't as involved when it comes to going to, you know, a builders and also assessing the price point. And I think this is probably another tip because different contractors work differently with some contractors. They'll when they when they give you a quote, for example, they'll break down the scope of the work and their price will include their labor as opposed to, for example, separating the material cost and their labor cost. And the particular build I was working with worked with the former method. I found that that isn't the best method. You almost want to find out what the material list is. You can go by the material yourself. Make sure all of your material gets delivered to your property. So be very hands on in managing that component. Because the unfortunate thing is a lot of contractors will sometimes let's say you only needed 50 boxes, 50 boxes of tiles for anything. In and you typically would budget for like 10 percent more for wastage. So let's say it's 55 boxes. There's a Tyler or contractor that can easily say that you actually need 70 boxes and they'll make sure and that you get quoted on the 70. But the only the 55 gets delivered to your property and they either take the remainder or they ask for a refund from the store itself. So and this is something that I only picked up because I've been in it. It's happened to me, unfortunately, I've lost money because that's happened. But I now know better. So just understanding where some of certain instances where you could potentially lose out on money is so crucial. But then Lawrence, I think when we then have a better understanding of not overcapitalizing on the property and also just not going overboard. Because I think one of the things that I found, especially if you're on in the journey is you want to put all kinds of crazy finishes on that investment property and not and sometimes you can go over budget and not manage yourself very well. How do you make sure that we still keep within budget? Because part of keeping within budget is making sure that the bottom line remains the bottom line. So in as much as in our personal accounts, we may have that extra fine, those extra fines to buy the fancier tiles. How do we make sure that we're still able to stay within budget, not overcapitalize and run this like a business? Because ultimately, that is what it is. I think you've answered the question there. You've got to be able to separate what's your primary residence first? What's your business property? And to be honest, the investments that I do are all in low income or low income areas like Joe Bigg, CBB, Berea, Rosette and Ville. You know, so to fully renovate a unit would be 20 to 40,000 ran because you put in just the basic features for the tenant to be able to live. What I can say, and this is more my girlfriend speaking, she's got very expensive tastes, so I would never, ever take her to any of my investment properties because she'd be like, oh, my gosh, let's put in a gold tap. And then there's this diamond thing here. And then we need to make sure that the view, you know what? Let's do that at home. Our primary residence is what we can invest in because that's something that we can grow with. But if you're looking at a business, you've got to treat it like a business and you've got a budget. And if you go over budget, you start losing money at the end of the day. Lawrence, we've been primarily talking about the steps that one needs to take before they start their property journey or certainly their property investment journey. Suppose you've now done everything that we've outlined and you're ready to start. And then what are some of the basics that throughout your property investment journey should you always sort of go back to? Because I think it's very easy to get sidelined in properties, particularly right now. I mean, I'm seeing a lot of different players doing really interesting things and it could be very easy for somebody who may have gone in wanting, for example, to go into a low income area and only look at apartment blocks that are five to 10 units only. And then you're seeing somebody doing something interesting with relatively big houses that you can turn into having multiple rooms. So what are some of the grounding, I'll say, factors should every property investor be mindful of particularly earlier on in the journey because it's easy to get sidelined and look at the new shiny things that keep popping up. And I think now within the property investment, certainly within the property entrepreneurial space, there's quite a lot of that happening. Sure, I think one fundamental principle that I think will make any person a successful investor is to not listen to opinion, but use fact to make a decision. And let me give you a quick example. You know, I look at a lot of areas in Berea, for instance. And oftentimes I will see the state agent put a nice marketing blurb on the ad that says, you know, great investment, this building is insured. It's in great condition, private security. They're making 10,000 rand in rental. It's a two bedroom, by the way, in CBD. You know, now if I just had to take that on face value and I had to run my numbers doing that and just assume that the building is in good condition and that I am getting 10,000 rand rent. You know what, when I buy the property and it turns out that I'm only getting 5,000 rand rent, I'm in a pickle. So, you know, for me, I will not consider moving forward with the deal unless I've seen signed lease agreements. I've seen annual financial statements of the building. I've seen COJ bills that I can see the COJ logo on it. So I know exactly what the rates and taxes are. I want to see a proof of levies. I want to see six to twelve months worth of income and expenses because if I can see the actuals and my inputs are correct, the output, which is basically my ROI and tells me if I should move forward with the deal or not, will be accurate. And I think regardless of what strategy you do, be it Airbnb, capital flipping, sourcing, wholesaling, whatever it may be, as long as you're using actuals, then you can trust the numbers. And, you know, that's actually such a great point to highlight, Lawrence, because more often than not, the estate agents, they're only doing their job and they will, of course, position their ad as a great investment. And in some instances, it may be, even in some instances, probably not. And one of the things and something I was highlighting in an investment session just to speak is that when you run your models, when you even look at what you think you may potentially get in terms of rental, be as prudent as possible. So even look at whatever the average is right now, try to go even lower, particularly in this market. We don't know how long we're going to stay in the current economic climate. We don't know if we're going to have things go even worse. So almost want to budget for a worst case scenario and still be able to get decent deals in the event where you don't collect rental at the current levels. And Lawrence, before I let you go, though, any final tip for our property investors on the property investment journey? I would say, you know, there's so much content out there. Get yourself educated. Go look at my YouTube channel, Lawrence Bull Property Coach. I put a whole lot of free videos out there, but there's tons of resources. Go look at bigger pockets. For me personally, that's one of the best websites. You know, private property has got a lot of great podcasts and newsletters. I think there's so much free. There's a wealth of free information and knowledge out there. Properties and expensive asset class rather just take a couple more months. Just do your due diligence. Do your research instead of buying a bad apple. Just make sure you're buying the right investment because, you know, property is a great adventure adventure, but you just want to make sure you're doing it in the right way. And that's a great place to leave it at, Lawrence. Thank you so much for joining us this evening. Thanks, I'm going to go. Always a pleasure. And that is Lawrence Bull, who's a property coach and an author wrapping up the Friday edition of the Private Property Podcast with myself. I do hope that you've had a great week with us. I'll be back on your screen on Monday evening at 7 p.m. as usual. It is a Friday, so Chad is going to be bringing you the Home Shopper Show at 8 p.m. Until then, hope you're staying home and staying safe. Thank you so much. Always a pleasure, always a pleasure, someone to do that. How was that? You enjoyed it? That was great. Absolutely enjoyed it. All is great chatting to you. Nice. No, you too. Thanks for being such a great host. It's always a pleasure.