 And we'll be talking property investors, right? You're already speaking about them hitting the ceiling. What are other challenges that you guys have identified that could be threats to investors not being able to grow their property portfolios? So it's so incredibly important for us that investors remain healthy that they can manage their existing portfolios. We want to make sure. Want to hear about tonight. Yes, we are talking about financing your next investment property with Apsa's future rental income. So I'm talking to Miguel Martins, who's a portfolio manager from Apsa. He's an investor's Apsa's home loans division. And I really, we are really looking forward to having this conversation. Good evening, Miguel, how are you? I'm fine. Thank you so much for having me looking forward to our conversation. Thank you so much. If you are joining us for the first time, this is on this podcast, we talk each and every single thing around property. We talk about investing, buying, selling, and whatever you're really looking for, just managing your overall property portfolio and ensuring that it grows from strength to strength and just becomes better. Tonight, we are talking about growing it. And that's why I was saying that this is something everybody wants to know about because Miguel is going to be telling us about Apsa's future rental income or is it a product? Is it a way of doing things and what it actually entails? So that will be my first question tonight, Miguel, to say, what is it? And how does one get to use this opportunity? Fantastic to me. And this is a conversation I've regularly with investors. I probably get a call from an investor every other day just asking about how do they get finance, listening to some of their problems and just want to find solutions for them, not just to maintain the existing portfolio as possibly to get into their first property but also closer to grow. So about three and a half years ago, one of the challenges we had was that investors were generally purchasing one, maybe two investment properties and then nothing, and then not further. And as we got around the table with quite a few investors nationally, we started to realize that the issue was affordability, that investors were hitting an affordability ceiling. So it got to a point where if they added their income as well as the rentals they're receiving onto their finance applications, that they were actually hitting their max and they weren't able to actually access and grow further than that. What future rental income does as opposed to using existing rental income is it allows you, allows investor who is an existing investor with at least two properties in their portfolio to add the expected rental income of the property that they are purchasing to their affordability. So that's what we call it future rental income because we're adding the expected rental that they're gonna be earning to their income and affordability. This helps most investors just get over that hurdle and just break through that glass ceiling and have the ability to finance their next property. And we'll be talking property investors, right? You already speaking about them hitting the ceiling. What are other challenges that you guys have identified that could be threats to investors not being able to grow their property portfolios? So it's so incredibly important for us that investors remain healthy, that they can manage the existing portfolios that they are quite steady tendencies and they're managing the vacancies and their costs because a healthy investor financially, fit investor is a good bank customer and it also allows them to then come back and continue growing their portfolio. So some of the problems we've seen and I first put it into managing one's portfolio versus growing the portfolio. So the managing portfolio first and foremost interest rates. We are in an increasing interest rates environment. We've already seen a couple of interest rates increases of 25 basis points twice, I think, over the last few months and we're expecting a few more increases this year and into next year. But the absolute house position is that we're expecting interest rates to hit a max of or at least to hit 8.75% by the end of next year. That's an economic forecast and the various different forecasts in the market. But so although we end that increasing interest rates cycle at this stage, we still are well below the 10% that we were at pre-COVID. So although our financing costs are increasing still below what we were pre-COVID but definitely increasing. And of course, you offset that with a weak rental market in terms of rental increases. We're only seeing about 1.8% increasing year on year. It definitely does start to squeeze the margins for the investors. And then thirdly, tenants under stress. Tenants on the income stress. Tenants also fire the cars that they're financing, et cetera. So interest rates increases and other inflationary costs are also stressing tenants. And that just really requires investors with the portfolio, whether it's one or two or 15 apartments and properties that we do manage them carefully. We do manage them and start to think about what are the other shocks that can come through to us and try to prevent that. That's on the managing side. On the growth side, of course as investors we need to absolutely safeguard our credit profiles. We need to ensure that we stay up to date with our payments and that we keep that credit profile blemish free because as soon as that is tainted and accessing finance becomes so much more difficult. Of course, I spoke about affordability running out. That's a common issue with investors. And in that way, it really is about managing your net rentals, making sure that when you do invest you need to invest in good cash flowing properties. You've got the right skills behind you. Our most recent HAPSA homeowner sentiment index, the results that come out of that was that investors are still positive about the market, but they're tentative. They are careful about what their next step is. And I think that's just a general theme that we have for whether we're managing or whether we're growing our portfolios. Sure, and you know with something like this that assists investors, are we talking specifically for residential or residential properties or are we talking all categories of properties because as an investor someone might want to just open up their portfolio from them just having residential to having commercial to having warehouses and even some land. So is this open to all categories of properties or is it specific for some? So the HAPSA future rental income is specifically for residential properties. We're the only bank that offers it and creates ability for investors to extend their affordability with future rental income. And that's how we do it with existing investors who are already in the market. When you start looking at commercial property and the various types, although it's still property, it's a very different market with very different dynamics and there are variations of future income that are utilized but those are very different strategies and the financing in that space is done quite differently. Here we're looking at home run residential investors and there are a lot in terms of market size, there are a lot more residential investors in South Africa than there are commercial investors. So we really are. So this income type, this income type, this part of our back to let product really does appeal to the majority of property investors in South Africa. Sure. And now let's talk about the nitty gritties of one actually getting into or using the service that HAPSA offers. How can someone go into it? And you spoke a little bit about that but if I don't have the properties or properties that I've already bought and can I buy as a first time owner or is it just specifically for people who are going into the investments? That's number one. And number two, how does one, if I'm already in this investment offering, how can I make sure that it stays lucrative and it stays working for me? Because sometimes things happen, especially when you're investing and with the different movements in the market, with COVID throwing curveballs into the industry, what ends up happening when an investment is not panning out as one had projected? Absolutely. So quite a few points to be made there. So we partner with two key industry partners, the South African Property Investors Network, SAPIN, as well as TPN. So as an HAPSA customer, you can access the South African Property Investors Network which provides education, content, networking with other investors. And we really encourage investors to build or get into networks with other investors because those problems that you mentioned, they can affect an investor at one point and then investor now has the ability to share their experiences and the solutions that they found in that particular situation with other investors. And SAPIN as a key partner of ours enables investors to come together and to share those learnings and insights. And then our department of the likes of TPN, TPN is a credit bureau, a tenant credit bureau. And with TPN, investors can, when looking to invest in a particular suburb, they can pull a suburb report. And in that suburb report, TPN includes what is the good standing ratio? How many tenants, what percentage of tenants in that area are paying their rents? What are the average rentals? What are the average vacancies, et cetera? So some really good tools and reports that TPN provides as well as property rental software. So really, really, really great products and services from both SAPIN and TPN. Armed with that, an investor is in a better position to go out to find a property, to ensure that they've run the numbers correctly, they've got the education and some of the, and those partners behind them to ensure that they're making good investment decisions and a better position to manage those properties, manage the tenants. Tenants come and go in the implications of leases, going in inspections, exit inspections, et cetera. So really a wealth of knowledge with those two partners for a property investor to both grow as well as manage and maintain those portfolios. But running a property portfolio is not very different from any other business. Many people fall into the trap of thinking it's a hobby or treating it like a hobby or a very easy to do side hustle. It is, it doesn't have the same complexity as running a shop or running a store or any other kind of business. But if you apply good business principles to your property investment, whether you have one, two or 10 properties, it will come back to you and multiply effects because you really applied sound principles and thinking to how you manage your tenants, how you source your tenants, taking the long view as opposed to taking a short view in many, many situations. And we really hear, and part of what I do and part of my role at APSA is ready to support investors through that and by guidance and by direction bringing the partners like I've spoken about in terms of providing better direction and that's nationally. Sure, no, thank you so much for that. And I hope anybody who is watching who is a potential investor is really gaining a great insight from the conversation that we are having tonight. And you spoke some along the lines of business compliance and making sure that you are on the right side also of the law and understanding what each business or what the business entails. Let's talk a little bit about the tax implications of taking, of using a method like this. Is it, is there specific tax implications or even legal implications that speak to this particular where you're financing or is it just the same as it would have been done traditionally? Oh, no, absolutely. There, there, you know, so we're getting to the business of property management, letting sales potentially, et cetera. So, you know, a lot of this sounds like you, as a property manager, as an investor, you are partly an estate agent. If anything, just sourcing of properties, you're partly a letting's agent, you know, and all the aspects that come with that. So it is good to understand at a workable level the implications of the property practitioners act as it just came in, even if it doesn't apply, it doesn't apply to most self-managing landlords. It's good to understand that. In terms of the tax side of things, it's incredibly important to have a tax accountant that you can go to and you can explain to what you're planning to do, what your portfolio looks like and understand the tax implications of that. All of a sudden, you have to include the rental income that you earn onto your tax return. But you can also add the expenses incurred with that property on your tax return. And done correctly, it definitely asks some tax advantages with property, but it's definitely got to have the backing and the support from a professional like a tax accountant. From a legal perspective, you're entering into a contract with tenants. They're specifically legal frameworks and requirements that requires. So you're also good to have that legal support and ensuring that you've actually got an attorney who is experienced in property law and in dealing with tenants. There are many attorneys out there that provide this kind of services. Our partner at TPN, they provide an up-to-date lease agreement that they provide to their members and their clients. And utilizing that, you can have confidence that you are contracting in the best way possible in a way that protects the landlord and their investment as well as is fair to the tenants. So property investment can seem fairly simplistic and easy to get into initially, but if you want to do it properly and especially if you're wanting to build a portfolio, get to know the rules of the game. Because just like soccer, once you get to know the rules of the game, you know how to bend that ball. You know how to make it work in your favor. Thank you so much. The question was really apt and on the pulse. Thank you so much. We have actually reached the tail end of our conversation and thank you so much for joining us tonight. Such great insights that our Facebook family is going, is raving. Lewa Khan is saying great information and Sherreen is also really just saying that the information that we have received tonight has been so worth it. Thank you so much, Miguel, and have a good evening. You're fantastic. I'll go into Facebook and answer some of those questions as I'll add to some of the views. Please do that. Please do that. Thank you so much. Thank you to me. Take care. Thank you. And that is how we reached the end of our episode tonight and thank you so much for joining us. Thank you so much for staying till this part. And if you missed any part of the conversation for any reason, remember that you can still catch up on it and make sure that you watch from the very beginning. And if you joined us on the Twitter space, special shout out to you for staying till the very end. Until we see you tomorrow, same time, same place, right here on the Private Property Facebook page. It is good night. Thank you.