what you will learn in this webinar
Justin Harrison 00:01
Perfect. Good morning Miriam; good morning everyone. I see we've got 30 people on the live stream already. I just want to welcome everybody to this morning's webinar. I'm sure you guys are going to find a lot of value in it. In the meantime, while we're getting ready to go live with the presentation, and our interview this morning, please leave a comment with your name, let us know where you from, what part of the country you're from, let us know if you are inundated with cold weather and snow, or just cold weather, like us here in KZN. And if you've got any specific questions on property and purchasing property, your credit profile, with regards to accessing home loans, please post those questions in the comment box and Dawie and myself and Peter, we will do our level best to address those questions. So, Rachel: “Good morning”; Unathi: “Good morning, everyone”. Very nice to have you guys on the webinar this morning.
We decided to do something slightly different today. We decided to not just focus entirely on people's credit profiles, but rather give people some practical applications for people who are in the market, who are dealing with people who are purchasing, people who are accessing finance, and hopefully be able to answer some of your questions. I see we have quite a few more people commenting here. Vuyiso: “Good morning”; Nowiswe: “Good morning”.
Welcome to the webinar guys; I’ll just a very quick introduction to our guest this morning. Our guest this morning is Peter Cameron. He runs a real estate company - a real estate agency - called Cameron James, in partnership with his partner and long-standing friend, Butch James. And they are responsible for a number of developments on the north coast of KZN; they're involved in the sales, the marketing, administration and Pete has got a wealth of knowledge in the property sector, and we felt that it would be really, really valuable to put some questions to him in this morning, that would hopefully help new property purchasers, looking to get on the property ladder and obviously, existing people, looking to make the most out of their existing properties, maybe upgrade, maybe downgrade. I think this is a time of flux, it's a time of movement, and there's no better time to educate yourself than now. So, without further ado, Dawie, if you can take over?
David Bester 02:44
Perfect. I’ll be with you just now. I’m just sending the last notifications for anyone who hasn't joined us yet. I’m just making sure everyone has a chance to get online.
Justin Harrison 02:56
We notice that recently, we have slightly fewer people on the live webinars. Obviously, the time of day, people are going back to work now, so people are having to actively go an participate in the economy; that's a good thing but the replays will always be available. So please, if anybody would like to share this webinar, Dawie will be posting out links later today, where you can go and view the webinar. And as always, please subscribe to the channel, guys. Subscribing to the channel helps us get rankings in YouTube and helps get our message out there.
David Bester 03:33
Yes, so like Justin said already, today it's going to be an informal webinar. We’re having Peter here, who’s going to answer some of the property purchasing questions and like you guys know, we are already sitting with a record-low interest rate at the moment. So, I just read an article last night, actually, where it said, there was a record amount of bond applications that's been put in, over the lockdown, which is pretty strange, if you think about it but obviously, it's because of the interest rates - you're paying a lot less than you were paying, a few months ago. So yes, it's definitely, if you've got the money, it's a great time to get in the property market, and this is where Peter comes in. He's an expert; he's going to give us some advice today. I've compiled a few questions for Peter, and he's going to answer it. Let's get going. The first question is pretty logical, because we’re a credit report system or platform, so, we want to get Peter’s take on credit reports, and purchasing real estate. Peter, how important is your credit score, when it comes to purchasing real estate, in your opinion?
Peter Cameron 04:41
Ja, so obviously, it's very important, if you want to apply for a bond finance. If you pay in cash, it's not as important but normally the guys with cash, that can afford to buy in cash, have good credit scores already but it's hell of an important thing. Firstly, it affects your interest rate - what kind of an interest rate you're going to get. And if your credit status and your credit score is good, you'll have a much better chance of getting a bond. And then, in most cases you'll have to put down less of a deposit, which will help you. So, it's absolutely vital.
David Bester 05:16
In your opinion – while we're talking about credit scores - do you have any idea how many people actually get rejected, just off-the-bat, percentage-wise?
Peter Cameron 05:27
Ja, so for me, it just depends. So, if we’re dealing in an up-market development, I would say about 95% of people get accepted and get bonds. It's just the nature of the beast. And then, if we're dealing in a market under one and a half million, I would say about 70% of people get - and this is just on our projects - about 60 to 70% of people get bond applications accepted. On the higher end, the get easy finance; they normally come in pre-approved, before they arrive. So that's something that I would advise anybody to do is, to go and see what you can get - before you arrive at a property - see what you qualify for, before you get there. In most of the wealthy purchasers, they'll come in, they don’t have a problem, they’re normally with one of the private banks. But when you go one and a half million and below, that's when the guys battle a little bit.
David Bester 06:27
That's pretty interesting. I think a lot of people just immediately go in there, apply for a bond, without even knowing what they qualify for. We've seen that in some of the questions that we've been getting. So, just a note to everyone out there: there's loads of bond calculators out there, that you can use, if you just want to get a pre-approval.
Justin Harrison 06:48
Ja, absolutely. And I think, Dawie, the other very interesting thing that’s Peter’s noted is, that having a pre-approval in place, not only lets you know what to shop for, within your price range but it also makes everybody's jobs a lot easier, when it comes to putting in offers on a property because there's a lot of work that has to happen behind the scenes. And anybody who's selling, is really keen to get a good deal on the table, so if you come there pre-approved, it puts you in a strong negotiating position, hey Pete?
Peter Cameron 07:21
Definitely. I was just about to say that; you hit the nail on the head. You're coming in and you’re putting in an offer for a house and you can be a bit cheeky, if you tell the agent – if the house is on for R 4 million, and you show them that you’re pre-approved for R 3.6 million, here’s 400 grand deposit, I'm ready to go. You can put in a cheeky offer because it's all-systems-go but if you still have to apply for your bond and the agent’s not sure and the seller’s not sure that you can actually achieve it, then you're on the backfoot. So, come in, prepared and ready; it's almost as good as having cash. It's the same kind of principle.
Justin Harrison 08:05
Well, Pete, I would argue it’s actually better than cash in many instances. I don't know what the setup is in your business but I know that a lot of the real estate agencies actually make some kind of back end, if they manage to put the finance deal together. People always say, “Cash is king” but that's not always true, when it comes to property, hey?
Peter Cameron 08:27
No, you’re right. It’s just come back in and I think, it's a sign of the times. I've been doing this for 16 years and in the beginning, the bond originators used to give you 1% and 0.5, for getting the deal through them and then it disappeared after 2010. And then funnily enough, this year, it's just come back again and all of them are flooding back and everybody wants to give you a small piece of the pie. So, you're 100% right.
David Bester 08:55
Ja, I think it's because it's so much more competitive at the moment.
Peter Cameron 09:00
Ja, definitely. Now you can get in-house bond originators and there’s certain levels that you can go to, where the bond origination company will put somebody in your office, and they'll run it for you and then, you get a higher percentage of the bond. They’re even going as far as, now, if they insure the home, they'll give you a little kickback from that. So, it's definitely changed completely. When I first started, there were lots of these little deals going on and then it disappeared and now, all of a sudden, it’s all come back, which suits us just fine.
Justin Harrison 09:34
Ja, I think, Dawie, before you go on to your next point, one point that I want to make and I think, Pete will definitely back-up what I'm about to say. If you've been in the finance industry or in property or anything that involves big sums of money, you tend to understand how the banks and the financial institutions work. People tend to think that when banks are no longer giving 100% bonds or where they tend to be less lenient on lending, people tend to think that has to do with the individual, but the reality of it is, it has a lot to do with the market and there are times when banks and financial institutions preserve capital. In order to preserve capital, what they do is, they make the criteria to borrow, that much more difficult; they make it, that much more stringent. And so, often when you find there are easy deals on the markets because the banks and the financial institutions want to get capital into the marketplace. But when there's a contracting economy, often what happens, they try and preserve that capital. If they’re overexposed on the portfolios, the banks are overexposed in property and home loans, they may want to contract those books and put the money elsewhere. So, it's hellishly important to have a good credit score; it's hellishly important to be pre-approved, but people also need to look at the different stages in the market and right now, we are in an economy that is contracted but what normally happens in a contracting economy is, that you find that the banks have to put money into the marketplace to keep the economy stimulated. The Reserve Bank - the government says them, list guys, you have to put money into the marketplace; spending is what keeps our economy alive. So right now, there has never been a better time, in my opinion, to buy property, despite the low interest rates, the access to capital, right now, is extremely available.
David Bester 11:29
We're sitting with record-low interest rates but the banks also know that if they lend out the money, eventually, the interest rate is going to rise and the people are going to pay more to the banks as well.
Justin Harrison 11:44
Ja, absolutely. Absolutely.
Peter Cameron 11:44
That's something that people must just be aware of is that I also think it’ll drop again, by maybe 50 basis points, sometime this year. But come the back end of 2021, I think it'll go up by another 150, so, the key is to be able to try and find a way to put in a bigger deposit, so that you're not so leveraged out to the bank, because when interest rates do increase, and listen, I’m in the property selling game, it’s almost like a warning, just something to look out for is, right now, it’s cheap money – cheapest in decades. But you can't really fix it, but in two years’ time, it could go up by 150 to 200 points. So, you’ve just got to be aware of that.
Justin Harrison 12:32
[inaudible] I remember in 2001, 2002, we had come off the back of historically low-interest rates; some of the lowest interest rates, we’ve had in history. And what followed that, was a period of the highest interest rates, we've ever had in history, as well, so, people have to be aware of those cycles. One tip I can give is, whatever rate you get today, if you lock that in at one or two points higher than what is the current rate but lock it in for a period, you're going to do yourself a solid. Because you’re securing an interest rate today, which without doubt, is going to go up in the future.
David Bester 13:13
So, Peter, adding to that, you said that it's difficult to fix the interest rate. How difficult is it? How can you fix that interest rate?
Peter Cameron 13:20
Ja, so it's just your relationship; obviously, there many avenues. But, for me, it's just about having a good relationship with your bank and your banker. I would advise anybody, before any property transaction, if you have access to it, is to have an accountant or CA in your one hand and a lawyer in your other hand and then to have a real estate agent advising you – the three of them, advising you on what to do. It's not just going in and winging it; preparation is the key. Like everything that you guys are doing. If you’re looking to go and buy a home, the research that you do beforehand, is where you make your money when you buy not when you sell. So, the research that you do in the beginning, is the most vital. It's getting in touch with your banker, getting pre-qualified, asking him or her, can I fix my rates. They will let you know immediately. Having your accountant on your other hand, advising you; having your lawyer there to read the contracts, to make sure there are no little fine prints. But having a CA, a lawyer and your estate agent, all in one team, with yourself and doing proper research, that's how you get the best deals out there and going along with your banker, that's how you can find out how you can fix the rates.
David Bester 14:42
It’s a very good tip. My next question Peter, in your experience, have you seen a big difference in the interest rate that people get approved for, based on their credit scores? For instance, let’s say, I have an excellent credit score and Justin has an OK credit score, have you seen a big difference in the interest rate that the banks give you, based on that?
Peter Cameron 15:07
Yes, definitely. It could be, over 20 years - exactly what you're talking about - will save you a lot of money. So, having a good credit score is absolutely vital in that regard. Because, if you're taking out a R 4 million bond over 20 years and the guy with a good credit score has got a percentage higher, take it over 20 years, it adds up to, five- 600,000 bucks. It starts to accumulate and so, it’s absolutely vital.
David Bester 15:45
That's pretty interesting and I think most people, when they apply for a bond, they just go apply for a bond without checking their credit score first, when there's actually a few tips they can do or a few small adjustments they can do to increase their credit scores. And, like you say now, just getting 1% better interest rate can result to about five- to 600,000 savings over a 20-year period.
Peter Cameron 16:08
Ja, and I think what's going to be interesting now - and I’ve just seen some of the questions in the live comments and I don't have the answers to this - but with COVID, I think now we’re going to, over the next couple of months, with the banks having their rescue plans and relief programs. It's obviously helped a lot of people, but it ends at the end of this month. So, there's going to be a lot of opportunity on the table and I pray that people can sustain their home loan and everything. But it’s going to be very interesting to see how the next three months are handled, with people that haven't recovered from COVID and now their relief system has been taken away and they're back paying their bonds. So, the next three months are going to be very interesting to see how that turns out.
Justin Harrison 16:54
Ja, we've seen people's scores fluctuating quite heavily. And also, the one thing I try and tell everyone is, these debt relief and debt holidays or whatever anybody wants to call it. All it is, is basically deferring the problem. It's like saying, Listen, I know I’ve got a tax bill coming but let’s just carry it over to the next thing. So, the point is, it's going to hit you at some point, and especially when it comes to home loans. One of my biggest tips to everybody is, first of all try and negotiate your rates down; that’s tip number one. Number two, in a low-interest rate market, try and peg your rates because the longer you peg at a decent rate, the more money you save long-term. And then the third and probably this is the most important tip is, always make room for putting extra money into your home loan. And had people been doing this before COVID, that would mean, that they would have had some legroom during COVID. But unfortunately, it's the age-old advice that our parents gave us and we never listened.
Peter Cameron 17:59
Ja, you’re right. It like one of the new projects we’re doing in Palmview Estates, this 500,000 – R 2 million market. Our biggest competitor is a guy choosing to buy a new car, over investing in a home. So, now what we’ve found is, we actually have to educate people on property, as an asset class, and to convince them not to go out and buy that BMW; rather keep your car that you’ve got and then invest in a home. And, I'm telling you that but the first thing I did when I was 26, was, I got Range Rover, instead of getting an apartment. It was stupid and then my mates that didn't do that, they had kept their Golf they had from varsity and bought an apartment or whatever. It just took me longer to catch up to them. Although it's easy for us to say, hey, don't go buy that car and invest in property; I’ve been there, done that, got the t-shit and you bang your head, but just from experience, if I had to do it all over again and what I'm trying to instill in my kids, is that they make those wise decisions now. Take a little bit of short-term pain, don’t massage your ego too much, and then you'll have a bigger asset base later and then you’ll have a passive income from your rental properties and then you can go buy that car cash. So, in this affordable housing market - and when I say affordable - we try to rebrand the eco-estate, economical estate because affordable housing has a negative connotation to it. I think people that live there, for them R700,000 in an estate, that's like 7 million to somebody else; they deserve to not be called ‘affordable housing’. So, we’re trying to rebrand it as eco-estate – economical - and that's been our big challenge. So, we when we launch, it's just about education.
Justin Harrison 19:56
Absolutely, couldn't agree more; that's part of the reason why we do these webinars. Dawie and I decided to take time out of our existing businesses to do this because we feel there’s a big education factor that's lacking in the market. All the stuff that you've spoken about, where to put your money, why to put your money there, but also, to really give people education to get started because let's face it, buying property is probably the biggest thing that most people are ever going to do. So, arming yourself with the right knowledge is really, really critical.
David Bester 20:29
So where do you see the property market actually moving, in the next five years then, in S.A now?
Peter Cameron 20:34
Ja, so for me, I think in the high end, everything's going to be price-point driven. I think houses are going to get smaller; they're going to get smarter – smarter, tech-savvy homes. So, instead of the old age having a 500 square metre house, developers are now going to make them 250 - 300 squares, just to keep that price point down. Everything's going to be about price points. But what’s nice about there is, with clever architecture, smart technology, I think it’ll be fine. So, Val de Vie, down in the Cape, one of the benchmark developments, I’ve based a lot of my stuff on it. And Charles Thompson from ConstructionID and Devmco, they've kind of done that in Sibaya. What they’ve really mastered is being able to keep the price point down but instead of having these huge houses, they just make them smaller, but clearly designed. And then, in the affordable space, I think that's going to be big. I think, a one and a half million and below, is going to be huge. I leant the other day that 75% of sales, that happened last year, were under a Bar. So, everybody's focusing – all the real estate companies are focusing - on the top tier 15% and that’s only 25% of the market. I think that we're in for an interesting time but the investment, goo properties are going to be under one and a half, and then, all the more expensive stuff, are just going to be a lot more compact and smaller and that's where the market will be.
Justin Harrison 22:19
Ja, Peter, I think you hit the nail on the head there. If we go back to the early 2000s and we'll watch the evolution. Early 2000, estates were quite a new thing. It was the norm to live in a freestanding house and it was the exception to living in an estate. And the market slowly started to move that way and what we started to see was, your pricing per square meter of the home, in an estate, was that much more expensive, than a square meter in a freestanding home but what came with it, was amenities. So, you had security, you had a clubhouse, etc. And I think what you're saying now, is a very logical evolution. People have gone from these traditional five- and 600 square meter homes, down to 250 - 300 is a big home today, especially if it’s well-fitted, the space is well used, there’s good technology. There's one thing that you said in one of the videos that I saw you put out in Facebook, which really grabbed my attention. It’s something I've been doing for the last while. And I think, when we're talking about money, when we're talking about finances, we have to look at the sustainability at homes because what people don't realise is, you buy a home for, let’s say, two and a half million or 3 million. People have no idea, the costs that goes with running that home and if it's a new home, there’s certain costs that go with that because you've got to kit it out, the way you want it, over a period of time. If it's an older home, you're going to have to maintain it. But things like, electricity, water - and this is a big one - food, I believe are going to be the three big driving property factors in the future. I think people want to be self-sustainable; people want to be off the grid, and growing a vegetable garden is moving from a hobby to a necessity. And that is something that's going to change, drastically and I think estates, especially, have a unique opportunity to integrate that, as part of the package.
Peter Cameron 24:09
Ja, exactly that. During COVID, I escaped and I went to my parent’s farm and it was the first time that I really came back and I took a break and I was clear because we almost seem stuck in this CNN and all the news and everything was negative. And for some reason, I just started watching the news again which I'd never done. So, I escaped to the farm and I had some fresh air and when I came back, I realised, because I live on a golf course or a golf estate, but going forward now, I want to have my own vegetables, and I don't know, if I'm physically going to be a vegetable farmer myself, but I like the idea of having it onsite, having it in my garden. There are new developments: Elaleni Lifestyle Estate, that’s coming up - Wesley Bench-Capon is doing, where they’re doing exactly that. So, you can either choose to have a big 5000 square metre plot or a smaller plot, but on the estate, there’s going to be honey with beehives, there’s going to be vegetable gardens, they’re growing coffee. So, like once a month, you go out and you get tray and, on your estate, they're going to give you your vegetables, that are organically grown, with no pesticides and things like that. And I think, that’s for me, how I want to live. And then, from an off-the-grid green efficiency point of view, we've been talking and talking and talking and every developer gets to that final stage, where they go, we’re going to make it green efficient, and then they go, wait, it’s going to cost us another 150,000 with the purchase price and we're going to scare buyers away, so we're not going to do it. So, I'm challenging the developers out there, with this comment, have the balls. Let’s do estates now that are green efficient; let’s do 50% off the grid. Instead of it, we’ve got these sand tent 400 and we’ve got a whole bunch of little rules that are happening. But I think, it's about time, somebody just grabbed it and said let’s go; let’s just start at 50% off the grid and see how it goes from there. And nobody’s done it up to now, successfully, in Natal, anyway.
Justin Harrison 26:18
Look, we could have a whole other webinar just on the subject because it's something that I'm extremely passionate about. I'm passionate about it because I believe in self-reliance. I'm also passionate about it because at the end of the day, it affects the bottom line in your pocket. If you're able to spend less time in the shops, feeding your family; if you're able to be less reliant on a power feed, it also makes you more aware of what you're using, right. So, all of these things tie into basically keeping more money in your pocket and that's really what we want people to do. And I think, there's such fantastic systems out there today - today is very different than five years ago: aquaponic systems are great, solar systems are that much more affordable - I cannot understand why any new developer right now, wouldn't put that front and centre of their development because even though it might work out slightly more expensive per square meter, people need to understand what they're doing is, they’re buying the future – they’re buying future savings. And when people can understand they’re buying future savings, I cannot see how, logically, people wouldn't go for that. And this has to be one of the key things that sets us apart, as South Africans, in the future. It's one of the things that has to set us apart, in terms of reshaping our landscape, in our developments. We absolutely have to include sustainability and the pressure needs to come from buyers. If buyers start voting with their wallets; if they start voting with how they spend their money, other developers are going to have to catch up.
David Bester 27:51
It’s very interesting, we're talking about this now. I was actually searching this last night and I came about this awesome concept, it's called a ‘Smart Garden’. So, it's basically pots, that you add into this thing. It's small, but you can travel around with it anywhere and it’s got a little light over it. So, the points are perfectly formulated, the soil is perfectly formulated, you just put the pot in, and you plant your own vegetables, right. You just add a bit of water and you use the app to educate yourself on growing this thing. But you're not really doing the hard work, you're just giving it water every now and again and it tells you when the water is finished and you just add the water. The climate is perfect, you can grow anything - over 200 different kinds of vegetables. If developers take something like this and integrate it within the developments, it'll be a big space saver and just an easy way for people to live sustainably.
Justin Cameron 28:45
Dawie, the way I equate this is, if you go back and look at how caravans have evolved. I'm not a big camper but caravans have evolved considerably over the years. You used to buy a baseline model, and then add the things you want. And what's happened now is, the market has dictated that they want a really high-end caravan, with everything in it. That’s pretty much, where things have gone. I think this is where purchases are going to go. Purchasers want to buy a home, when they walk in the front door, something's going in the backyard, energy is created on top. They know they’re living green, they living sustainably, so I definitely think that’s the way forward.
Peter Cameron 29:20
Ja, and there’s that book: ‘Let my people go surfing’. The guy started Patagonia. I mean, I read this thing and I was blown away about it. He just said, enough is enough, now. We’re going to do this sustainability and going back to what David was saying earlier, I mean, just going to a farm and picking an orange off the tree and eating it, I can't tell you how much better it tastes, than a Woolies or a Spar, whatever. And it might not be as perfectly shaped, but watching my kids do it and they go, Jeez, this orange is actually sweet. And knowing there’s no pesticides or anything being put onto it, there’s something for your soul in that, as well. So, it saves you money but I think, living that sustainable lifestyle and growing your own food and eating it or whatever is also good for your soul and good for the soul of your family.
Justin Harrison 30:19
Absolutely, couldn't agree more.
David Bester 30:22
So, Pete, you're a big fan of estate living, right? So, why do you prefer estate living above freestanding in South Africa, at the moment?
Peter Cameron 30:32
So, first of all, I brainwashed myself about gated estates, that’s the truth. Sixteen years ago, I was living with one of the first onsite teams in an estate, called Simbithi Eco Estate and I’ve lived in an estate for 16 years, I haven't locked my door. When I leave or when I go away for the weekend, I lock the door from outside and leave the key in so the wind doesn't blow the door open. And, you know, we live in South Africa, which has got a high crime rate and the thing is, I don’t want to disrespect anybody who lives outside of an estate, because a lot of my mates, they think it's like having a noose around their necks to be in an estate. They say they can’t handle the rules, they don’t like all of that. And, I respect that and they live more differently with more freedom. For me, freedom is knowing that my babies are safe, and I don't want to have burglar guards and alarm systems and stuff like that. That's the benefit of estates. You can also, either, the community side of things, there’s clubhouses and the golf course and you’re safe. I mean, the number one thing is safety, then it's the amenities. That’s the benefit of being in an estate. And it's got its own kind of freedom. Although people think that, there are lots of rules – like, I'm not going to abide by rules. I’m that Justin Harrison, I go surfing all over the world, I can't take these rules. The reality is, that those rules, kind of, protect your freedom, so that you can just be free, leave your doors open at night, and never have to worry about anything happening. So, the benefit of living in an estate, is all of those. And then, people that live our side, in residential areas, they just have to have alarm systems and security guards and their ways around it. But my sister - I use her as a perfect example - she doesn't live in an estate, she obsessively, compulsively, locks the doors. She locks all the doors, and she goes to bed and she hears a noise and she wakes up and she goes and locks lock every door, that she's locked. She goes and locks it again. And that completely freaks me out. And I’ve used that story to help people buy into estates, just because of that. I had a couple, from Westville a few years ago, who moved into Brettonwood and at about nine o’ clock, on their first night they stayed there, they phoned me and said, “Pete, we’re going to book into a hotel”. So, I said, “Why, what’s wrong? Can I help?” And they said, “No, there’s no burglar guards”. And I said, “Well, you don't need them”. They’ve never not slid their Trellidor; they’re a couple in their sixties. They said, “No, we’re going to go down to Canelands and we’re going to book ourselves into the hotel”. So, I went round to their house and I said, “Guys, you are safe here; just trust me on this one”. And they didn't trust me, but eventually they did it. And then, within a week, they were leaving their back door open at night, so their dog could come and go have a wee in the garden or whatever. But the mindset change was unbelievable. They really couldn't believe that they were that safe.
Justin Harrison 33:46
Ja, I think there's another thing, Pete, if I can just interject quickly, from a financial point of view. Logically, people all want to aspire to live in a safe environment but from a financial perspective, what a lot of people don't realise is, that you land up paying less in an estate. People don't actually get this, right. So, first of all, your insurance is usually lower, okay, so that’s usually something that people don't look at. Secondly, your asset class is a lot more protected within an estate, than it is in a freestanding area. So, typically you'll get slightly better financing deals within an estate. On top of which, a lot of the core maintenance around you is taken care of. Yes, you’re paying rates and taxes, plus levies on top of that. But what that attributes to is that the future value of your property is upheld. Estates, typically, do a lot better financially than freestanding homes. Now, there are exceptions. If we talk about investments, there’s a lot of really good opportunities to take freestanding properties and turn them into, what I call, multiple housing zones. So basically, take one house, split it up and put three or four tenants in. There's a lot of opportunity for that in freestanding, which is not necessarily available in an estate. But typically, in an estate, your asset is more protected; long-term future value, it is better in an estate. No question about it. I should come and sell for you, Pete.
David Bester 35:17
Ja, it makes sense.
Peter Cameron 35:18
Hey listen, you’ll kill it.
Justin Harrison 35:24
Alright, Dawie. Next question but we’ve got about 15 minutes left, so we need to get through all your questions quickly.
David Bester 35:31
Ja, I’ve still got quite a few, so we have to run through them quickly, so we can answer a few questions as well. So, in your opinion, when should someone buy and when should they rent? Like, when do they make the decision: okay now, I'm going from renting into buying?
Peter Cameron 35:45
Ja, again, affordability: what you can afford, saving up for that deposit. For me, if you can, save up to put down a 30% deposit as a minimum. One of my partners, he only buys property if he puts down 50% cash and bonds 50%. I know that's unrealistic for most people. So, if I was to buy, probably at the beginning of COVID, and there’s still window period now for the next two months, when that’s the best time to buy. Money’s never been so cheap. I'd say, people are getting 20 to 30% discounts, it was 30% a month ago, now it's about 20% and I think next month, it'll be 15. There’s an old age saying, “blood on the streets”. The blood is on the streets now, and I know, a few wealthy guys that have just been snapping anything up with a 30% discount. And what's a little bit scary is, that these same guys are telling me, that every five or six years, something happens in the market – a pandemic or some kind of crisis - and then, something happens in the market, they go and they swoop and buy everything with 30, 40% discounts - houses or distressed businesses. And then, guess what? The market turns, and then they make their money and they reckon, every five - six years, something happening. So, I don't want to be a conspiracy theorist but these are guys that have been doing this for years and they say that what’s happened now, isn’t uncommon. And it's just got a different name.
David Bester 37:20
[inaudible] Everyone on this webinar, you just heard what Peter said, that's how the rich get richer: they educate themselves; when the opportunity comes, they take it, and that's how they get money,
Justin Harrison 37:29
I just want to make two quick points because I think this is really relevant on the points that Pete raised. Number one, if you are renting, preparing yourself to buy, try and save a 30% deposit. One of the best ways, that I can give advice on how to do this: only rent the space you need. Because here's the thing, right: when you buy, it's completely different to when you rent. When you buy, you usually think a little bit further ahead but when you're renting, really think day-to-day. There's a statistic that shows that, only about, somewhere between 40 and 50% of your space, in your home is used, all the time. Most of us can actually get rid of half our space and still live very comfortably. So, when you're renting, rent as small a space as possible; save up your deposit to get into the marketplace. That’s the first thing I want to say. The second thing I want to say is, what Pete has just hinted to is, that the market is very much based on cycles. I've been in the property market since 1999 was my first property deal. And I can tell you that, I've been through the highs, I’ve been through the lows, I’ve been through high-interest rates, low-interest rates, market crashes, market booms. There is one thing that I will tell you, that is consistent in property: things will go up, things will go down. It does this but it constantly goes up. If you take a look at prices today and you look at prices 20-years ago, whatever you paid 20-years ago, I promise you, is cheap today.
Peter Cameron 38:55
Yeah, totally agree.
David Bester 39:00
100%. So, I've got a few more questions but I just saw that Pete has actually answered them, so I'm not going to bore everyone else with those questions. I'm going to skip to the ones that we still need to get to because obviously, we've got a few questions lined up as well. Pete, can you give us a few negotiation tips for buyers, looking to get in the market? Like how can they negotiate that great deal because you said, you make money when you buy, right? So, how can they negotiate to get that perfect deal on the property?
Peter Cameron 39:32
We've discussed that a little bit already. The research is the most important thing. For the guy, wanting to get a great deal, go get a book, sign up to every single article that you can about property, make it your baby, learn every single thing that you can about real estate. Don't just go there, knock on the door and go buy something. Spend some time researching. Get a book, read a bunch of books about real estate, and then, get advice from people that have been down that road before. But then, getting to negotiating the deal, what's very important, is being pre-approved. Like we spoke about earlier – actually, come armed with your pre-approval and your deposit ready, so that, when it's time to negotiate and the guy wants 3 million for the place, you can say, “Look, I’ll give you 2.6 million and here’s my pre-approval and my deposit and this is a sign-off deal. Like Justin was saying, it’s almost better cash, but be prepared, and then you can negotiate. If you're coming in and you say, “Look, I want to put in a cheeky offer on your house but it's subject to selling my house”. You've got absolutely no chance. You’ve got to have all your ducks in a row. When you arrive there, you must be almost fluid and that’s when you can negotiate and be stubborn. Just be stubborn and be patient. I'll use 3 million as an example, and you saying, “No matter, what I'm going to get 2.6 for our house”. You just stick to your guns and you wave that bond pre-approval and your deposit if front of that guy long enough, and he doesn't get offers for a few weeks and then it turns into a month. All of a sudden, you'll get that phone call to come back. And if that deal doesn’t happen, then let that be; let it pass and go to the next deal and do the same thing and be stubborn, put your heels in. You make your money when you buy, not when you sell. And what I can tell you is, don't make emotional buying. I found guys that buy because their grandmother lived in that area and they always wanted to be there – jeez, those guys get cleaned up. So, don't be emotional when buying property. You’ve got to put your business hat on and be coldblooded and stubborn.
Justin Harrison 41:59
Ja, absolutely Pete. I always say to people: go prepared to buy but go prepared to walk away. So, prepare yourself to buy, do the research, do the fact-finding, find everything that's wrong with the property. Go in there and play devil's advocate. Go in there and see all the problems rather than all the solutions; that’s where you start negotiating. And then, once you are pre-approved, your house is sold, you're actually there, ready to buy; that’s the best time to buy. And then, be prepared to walk away from the deal. If the deal doesn't suit you, move along. There’s always a deal in the market; you've just got to be prepared to go and look.
Peter Cameron 42:36
Justin Harrison 42:38
And here’s one good tip that an old estate agent gave me many years ago: She said, “Drive 15 kilometres in every direction of the house you want to buy. Because that's how you buy property. It's not just what you see, it's what you don't see”.
Peter Cameron 42:55
Yeah, it's true.
David Bester 42:58
That's pretty true. I think that was the perfect ending to our questions. Let’s get into answering some of the questions that the users have got; were already at 45 minutes and Peter’s actually answered all the other questions as well.
Justin Harrison 43:16
Ja, I’d just like to start bringing up some of the questions here on the screen. If any of you guys are really interested in property, Dawie has a book out: ‘How to Make Money with Real Estate’. It's relevant whether you’re buying this as a home for yourself, whether you are looking to invest in real estate, as an investment to bring in income. It’s a fantastic book; you can get it on amazon.com, or you can go to globalmoneyacademy.com. The book is really a great starting point for people who've never really been involved in property. Dawie’s got many property deals under his belt. I've got a couple of 100 property deals under my belt. And if you guys are interested in any of Peter’s developments down the North Coast in KZN, if you are interested in getting any information, I'm going to flash Peter’s details across the website now, if that’s okay with you, Peter?
Peter Cameron 44:10
Justin Cameron 44:12
You guys can go to cameronjames.co.za. We obviously see who's the most important partner in this business arrangement because the surname came first in the real estate name, right?
Peter Cameron 44:25
Listen here, just because you win the World Cup, doesn't mean you get to get your name first on the thing. So, it’s quite a funny thing. Butch actually got me into property; he got me my first job, when I came back from playing rugby overseas. I didn't know what I was doing and he actually got me a job in property and then, when he finished playing rugby, I, kind of, returned the favour. So, ja, it is quite funny – I was the scrum-half and he was the fly-half and Cameron passed the ball to James.
Justin Harrison 44:58
Love it! So, guys if you’ve got any questions, this is the email address you can reach out to, if you're interested in property, interested in some of the new developments. I'm hoping to get Pete on the Global Money Academy webinar, one of these days, where we'll talk very specifically about income-producing properties. Today was more or less just covering property purchasing in general. So, let’s just get to a couple of quick questions here. I'm just going to randomly select some of the things, and bring them on the screen and then Dawie, if you can just handle those questions, as I'm looking for additional questions.
David Bester 45:35
Perfect. “I recently bought a vacant land which is finished, my credit score dropped due to the number of applications I made... Do I need to wait to increase my score to apply for a building loan?” Okay, if you applied frequently, yes, your score will drop. It won't drop that drastically. The inquiries on your credit report only accounts for about 10% of the overall credit score. So, if you want to increase your credit score quickly, I recommend you go look at our previous webinars that we did. There are a few tips that we gave, that you can do to raise your score quickly. Your inquiries will affect it, accounts for a 10% but after a while your credit score will increase again. But just go look at the previous webinars, you'll find great tips on how to increase your score quickly.
“If you can get a fixer upper property, can you apply for more to renovate and how do you know what the value of the property is and how much more to apply for?”
Peter Cameron 46:34
Ja,“if you can get a fixer up, can you apply for more to renovate” - yes you can. Again, it depends on your credit score, and the amount of deposit you can put down. “And how do you know the value of the property” - get estate agents to value it. Again, don’t just use one person, get a few people to come and evaluate and give you the true value of the property. Just remember that, the traditional agents sometimes inflate things - they tell you what you want to hear. It's always good to get a second opinion on what the real evaluation of the property is. Sometimes guys just want to get a quick deal, so they'll tell you what you want to hear. I would definitely get a second opinion on what the evaluation is of the property.
Justin Harrison 47:21
Ja, traditionally, what I would do in this situation, Pete, is I would often go to the local estate agency in the area, whoever the prominent agent is and I will ask them to pull property reports of sales, in the last year, of the immediate and surrounding areas. And what I then do is, I work out a value per square metre of the homes and I'll have a look at those homes, physically put eyeballs on and see, what is the, sort of, average standard of the home and get an average price per square meter. And once I see that price per square metre, that will give me an idea of what my offer could be, per square metre, leaving margin to actually fix up the property. And that per square metre price is a very, very good guide because what it does is, it takes into account actual property sales. So, never mind people's opinions, go and call for the actual list of transactions in your immediate area. And your local agent will do that for you.
Peter Cameron 48:22
That's a great point. What I also think, just for people out there, when you're doing a fixer-upper, if you're buying a house for R 1 000 000, you shouldn't be spending R 1 000 000 fixing the house up. This is where I’ve help guys, who’ve bought a house for four and a half million, and he phoned me – and he was a prominent rugby player, I’m not going to tell you who it is - and he found this gem of a house and I said to him, “How's everything going?” And he said, “You won't believe it, I've just knocked the whole thing down”, and he ended up spending R 4 000 000 in renovations. So, he’s in for eight and a half, nine, if you can transfer fees... [inaudible]
Justin Harrison 49:00
But I'm pretty sure this is a tender situation.
Peter Cameron 49:07
No, it was a shocker. Just don't spend too much on the fixer-upper. You’ve got to think about the investment. And if you’re starting to spend 30 - 40% of what the house is, you know you're on the wrong track; you’re getting the wrong advice. You need to get better advice.
Justin Harrison 49:19
Okay, the next question. I've got some pretty good questions and comments coming up here, Dawie.
David Bester 49:24
“Are there opportunities for buying run-down properties, renovate and sell them at a profit in S.A? If so, how best can you do this?” I think we covered this just now. Pete gave excellent tips on buying property and renovating them. Something that I want to add there is, the information is actually public. You can go to Property24 and you can get the statistics on the recent homes that sold in your area in the last while and the historical reports actually. You can get it from the Property24 website. You just search the area you're looking for, and you can find the information. Also, Lightstone sells you those reports. I would recommend just spending a small amount and buying the information and getting the actual information, compare it, look at the price per square metre, like Justin said, then you will know what you can often and what your profit margins are.
Justin Harrison 50:15
I’ve also got a really good tip for people. When I started out in property in 1999, I didn't have access to huge amounts of money. What I typically did in those days is, I would buy a property, self-renovate – I’d live in it, self- renovate, and flip that property for a profit a couple of months down the line. And back then, the market was very different to what it is now, primarily because there was a lot more margin. We were buying homes for R150 000, within a couple of months, we were flipping them for three- R 400 000. Those deals are pretty hard to find in today's marketplace, so my advice is to really think very cleverly about how to use spaces. You can often turn a three-bedroom into a four-bedroom. You can often take a house that has a single garage and put a double garage. It’s small little things that will make a massive improvement to property. But ultimately, what you need to look at is your price per square metre. If you can come in at a much lower rate per square metre, renovate, and pretty much then sell at market-related square meterage and make money, there are opportunities. But the opportunities are a lot harder to find today, than they were 10 - 15 years ago, so you really have to educate yourself and make sure you find the right information,
David Bester 51:34
“I have multiple properties: three are paid up; four still on bond. The street where two of my houses are, is commercial. A doctor approached me to rent my house for a surgery. How do I get more funds to convert?” Pete?
Peter Cameron 51:50
Jeez, you've got three houses that are paid for. If you're looking for more money, you've got assets already. And if this is going to increase your portfolio, I would use the properties that are paid for and use that as leverage to invest more. And if you think that this doctor and this house is going to make you more cash, I would leverage against what I’ve already got. You’re lucky that you’ve got three paid for properties; use that to your advantage.
Justin Harrison 52:21
Ja, solid advice.
David Bester 52:25
“Is it possible to transfer a property that I'm paying bond on to someone else, before it is paid up?” No, you'll have to finish your bond first. You’ll have to settle your bond and only then can the property be transferred.
Justin Harrison 52:36
Unless the new person is taking up a new bond and taking over the finance, you pretty much have to be paid up.
David Bester 52:45
They’re basically paying you for that property; you are selling that bond, with that payment.
Justin Harrison 52:48
Yeah. Here’s a good question for you, Pete.
David Bester 52:52
“I want to buy a property but I'm not at home in S.A. Is it possible?”
Peter Cameron 52:56
Definitely. If you’re in England, if you're in Europe, I know that in South Africa, they'll give you 50% bond. You're just not going to get a 90% bond; you’re just going to have to put down a big deposit. But hopefully, Jabu, if you’re in America or somewhere where you’re earning 1:18 or 1:16, it shouldn't be a problem for you to put down a big deposit but it just means, that you won't get as big a loan here in South Africa, as if you were living here.
Justin Harrison 53:27
Dawie and I are quite well-versed in international deals. We also, very much, try and be global citizens; we bank internationally, we finance internationally. One of the big tips I can give anybody who's looking to buy from outside of South Africa: first of all, you’re at an advantage because of exchange rates; that's a really good thing. Second thing is, you'll have cash to bring into the market, but this is really a critical thing. Try and keep a bank account open in South Africa, if you go and work overseas. Try and keep that credit profile going, try and keep that credit record going, try and keep that relationship going with the bank. Because if you have a good portion of money to put down and you still need to access a bond; if you've killed those relationships on the way out, you're going to have a really, really hard time because you have to start, pretty much all over again.
Peter Cameron 54:19
That’s good advice.
Justin Harrison 54:22
Let’s see here. Dawie, maybe you want to handle this question.
David Bester 54:23
“I just applied for Provident secured loan with a credit score of 586. Am I likely to be approved?” Sorry No, you're not going to be approved for that. You need at least between 600 – 650. 600, then you need an excellent payment history as well. I'd rather advise that you get your credit score up and only then, you go apply for a bond. You can get a credit score on My Credit Status and see what credit score or what range you fall into; that'll also give you a clear indication of the likelihood of being approved for the bond.
Justin Harrison 55:07
Okay, this next question, I think, will be well handled by Pete.
Peter Cameron 55:12
“I recently bought land in a not so urban area, does the location influence the amount I can apply for to build my dream house?” Yes, I think the banks will come and assess and when you say, “not so urban area”, I'm presuming, that's in a rural area. Location is everything. Whether it's buying or whatever it is. You want to build your dream house, if it's your forever home, go for it. And I think you can go nuts but location is everything. And from a bond application and the amount you apply for, the banks are going to come and look at the location and if it’s in a not so good location, they are less likely to approve your bond than if it’s in a better location. They want to protect themselves as well.
Justin Harrison 56:01
Ja, I think that’s the key that consumers need to understand. Whenever you're applying for finance, put yourself on the other side of the desk. Whoever's loaning the money, wants to make sure that their money is safe. In the event that you don't pay, and they have to take back that asset, they need to make sure that there's value in that. So that is a really solid point. And then, last two questions. This one, Pete, you might also be able to answer this. “Does a joined bond give my partner and I better chances? And also, are there less risks if there's a joint bond?”
Peter Cameron 56:40
So yeah, you definitely have a better chance but it just depends how strong you are with your partner [inaudible] So, with a business contract or anything; if your partner is your friend or a business partner, just make sure your document is 100% sorted and prepared for the divorce in any agreement. I’m not talking about a husband-and-wife divorce, I’m talking about a partnership. You've got to make sure that your agreement is solid because things go wrong, and all of us have got close networks of friends, but I've seen a lot of friends, not become friends because they've bought houses together. And then, the one moves away and then another guy wants to sell and then there’s a problem. So, it'll probably help you with the banks but I think, that there’s more risk in your friendship. I would try and do it on my own but if you’re really solid, then just prepare for the divorce, in your agreement, when you go together into business.
Justin Harrison 57:53
Ja, listed, I’ve just written a book called, ‘Marriage and Money’, which is on Amazon. We launched last week and it's so funny that this point came up. I don't care, whether is a platonic relationship, whether it’s a business relationship, whether it’s an intimate relationship, if you put money into a relationship, things are going to change, the moment you bring that equation in. I always say, go into every agreement, whether it’s with your wife-to-be, your current wife, your mates, your brother, your father, your sister; make sure you reduce everything to writing and prepare for the end. People always go in, all rosy-eyed and everything's going to be perfect. But listen, the shit’s going to hit the fan at some point, I promise you. Make sure you cross the T's, dot the i's, do all the things you need to do, because you have to prepare for separation; it will come.
And then, the final question we'll take and again, Pete, you’ll be well positioned to answer this: “I want to renovate my house to a double storey. Must I ask my bank for permission?”
Peter Cameron 59:00
So, I would say yes, if it's the bank's money because the bank owns your house until you've paid for it. They hold the title deeds, so you definitely have to let them know. I think you need to have a relationship with your bank, where you want to let them know. Once you get close with your banker - I’ve stuck with the same bank the whole time and then, I have more access to better loans, I keep my credit rating high - and you want to have the relationship with the bank, where you do tell them that stuff, because at some point, you might need the money to renovate and build the double storey from them. So, yes, definitely let them know.
Justin Harrison 59:43
Absolutely. I think also, what people need to appreciate, when they're doing any kind of renovations is, that there's a process involved, slightly differently for you in a freestanding home versus an estate but pretty much the same thing. First of all, you have to draw up plans, you have to have those plans approved. If you're in an estate, there's one extra step: you need to have the estate approve it, the body corporate or depending on the structure. And then, the bank has to approve that they’re going to loan money on those alterations because at the end of the day, they want to gain and make sure that their asset is secure. [inaudible] They’re not going to finance you putting a wendy house on top of your single story.
Peter Cameron 60:20
I think that's a great point. Just one thing that you need to be careful of here is, that you have to go to council to get your plans approved. It just depends on which region you're in, but those things can take some time and it can put things on hold a lot. So, be prepared, be patient with counsel. We're not there but hopefully one day, we can invent some kind of technology, where everything's a little bit smoother. But right now, getting plans through counsel is taking months, sometimes years. Just be aware of that. [inaudible]
David Bester 61:07
I know a local developer here; he’s got a partner who owns a plot of land in the suburbs. What they did, they spent hundreds of thousands on planning and architecture – the architectural plans and everything - and when council, they didn’t approve it because there was no water. I think you hit the nail on the head there.
Justin Harrison 61:31
Alright perfect, guys. Thank you so much Pete, thanks so much for your time, we really appreciate it. If anybody is interested in property down the North Coast, please go to cameronjames.co.za. The reason why we had Pete on today, besides his surprising amount of knowledge in property - and I say that because him and I were at school together and neither of us were very bright - besides his surprising amount of knowledge in the industry, Pete and his company, Ethos, is very much aligned with ours, here at My Credit Status. And that is, to put the consumer first, to offer real value in the market, and to put education front and centre. We’re simply not just about selling a product; we're about nurturing and empowering our consumers and I think, Pete's company is, pretty much, along the same lines. So, if you are interested in property down the North Coast, if you've got any property related questions, there’s the email address that you can reach out to. And Pete, thanks a million again for joining us today. We really appreciate your time, bud.
Peter Cameron 62:32
Ja, thanks Justin, thanks Dawie. It's been a pleasure; I look forward to the next one.
David Bester 62:37
Ja, thanks Pete. It was great to have you online. I see there are a few people asking; once again, we will publish the webinar replay on the website and we will send all the links out on the WhatsApp groups. If you enjoyed the webinar and found it valuable, please click on the subscribe link. You'll get notified when future webinars go online again. Thanks, and see you guys in two weeks.
[63:04 AUDIO ENDS]