It is a Great Time to Buy, but don’t Overspend

Homebuyers should never jump into the market with their eyes shut, even at times like these, when the combination of low interest rates and still-low property prices is creating some wonderful purchase opportunities.

Berry Everitt, CEO of the Chas Everitt International property group, says potential buyers – and especially those entering the market for the first time – should never lose sight of their own personal and financial circumstances, or of the fact that interest rates can go up just as easily and quickly as they come down.

“The low interest rates at the moment obviously do make it much easier to qualify for a home loan, to afford the monthly bond repayments and municipal charges, and to have money left over to keep the home in good condition.

“And as I’ve said elsewhere recently, prices in many areas are still below their pre-recession levels, which at the moment means that the sooner you buy, the better deal you are likely to get for your money.”

But it is extremely important, he says, for homebuyers not to purchase more home than they actually need just because it is “going cheap”, and vital that they leave themselves lots of leeway when working out what monthly bond instalment they can afford.

“Indeed, I think that buyers should always squeeze the price and not their budgets. What I mean by that is that rather than first finding a home to buy and then stretching the household budget to the limit to get the loan and afford the repayments every month, potential buyers should first take a hard look at what instalment they would feel comfortable paying, subtract some of that amount to allow for contingencies like the interest rate going up, and only then go shopping for the best house available in their price range.”

Everitt says good rule of thumb is that a new home should not cost more than 2,5 to three times the annual income of the family.

“So if your combined annual salary is R300 000, you should be looking at homes priced at R900 000 at most in order to keep up comfortably with the bond repayments once you have paid a deposit of at least 10%.”

Potential buyers, he says, should also bear in mind that the banks do not look at home loan debt in isolation. “Since the introduction of the National Credit Act, they have also been obliged to look at your overall financial situation – including debts such as car and credit card repayments as well as your regular monthly expenses such as school fees, insurance, food and transport costs and water and electricity accounts – before granting a home loan.

“And before you rush out to buy a home, I suggest this is what you should do, too, to ensure that all your debt commitments together will be manageable, even if interest rates rise. For peace of mind in this case, I would suggest that your total monthly debt repayments, including your bond instalment, should not exceed 40 percent of your income – which means they should add up to R10 000/ month or less if your combined monthly income is R25 000.”

This article has been reprinted with the kind permission of Chas Everitt International.
Barry Davies
011 801 2500, or visit
www.chaseveritt.com
Page Link: http://www.chaseveritt.com/html/press.html

What You Must Know About Your Managing Agent

One of the biggest growth areas in the real estate industry at the moment is the management of rental property on behalf of landlords – despite the fact that buy-to-let investments now only account for about 7% of property purchases, compared with about 25% in 2004.

“The main reason is that owners as well as tenants have come under increasing financial pressure in the past two years, and simply cannot afford to risk rental defaults,” says Berry Everitt, CEO of the Chas Everitt International property group.

“Many people still own several rental properties that they bought during the boom years and are in a situation where one bad payer could jeopardise their whole portfolio.

“But the most vulnerable in this respect are homeowners who, having found themselves in financial distress but unable to sell their properties in a soft market, are renting them out to cover their bond repayments while living somewhere cheaper themselves.”

Writing in the Property Signposts newsletter, Everitt notes that while falling interest rates have steadily reduced the incidence of non-payment or part-payment among tenants since last year, this is still around 20% (one in five) in most areas and income brackets, according to the latest Rental Payment Monitor compiled by TPN.

“In addition, low inflation and rising municipal service charges are going to make it very difficult for landlords to raise rents by much next year, which means that they will have little or no cushion if a tenant does default.”

In short, he says, the need and demand for expert help in managing rental properties is set to grow even more. However, there are some important things for owners to check before entrusting the management of their properties to an agent. These include:

• Ensuring that the agent is registered with the Estate Agency Affairs Board and has a trust account for holding tenant deposits;
• Ensuring that the agent is at least working towards obtaining an NQF4 or NQF5 qualification by the end of 2011, when these will become essential for an agent to practice legally;
• Ensuring that the agent has proper systems in place to check on the creditworthiness and payment history of prospective tenants, and will also establish that they are not currently under debt review;
• Ensuring that the agent will not under any circumstances hand over keys to the property until the deposit and first month’s rent have been paid; and
• Ensuring that there is a clear, written contract detailing exactly what services the agent will provide in return for his or her management fee – and whether this is a set amount or a percentage of the rent.

This article has been reprinted with the kind permission of Chas Everitt International.
Barry Davies
011 801 2500, or visit
www.chaseveritt.com
Page Link: http://www.chaseveritt.com/html/press.html

It’s safer to sell before you buy a new home

Many homeowners are looking at the upgrading opportunities presented by the current market and making offers to purchase bigger and better properties before they have even listed their existing homes for sale.

And there are of course certain advantages to buying a new home before you sell the old one, says Berry Everitt, CEO of the Chas Everitt International property group. These include the fact that you know where you’ll be living next, when you can take occupancy and how much you’ll be paying.

“Buying first also usually means you won’t have to move twice. Many repeat home buyers have had to move to an interim rental property because they couldn’t find a replacement home by the time they had to turn their existing home over to the new buyers.”

However, he says, this really may not be the wisest approach. “For a start, there’s a good chance that it will take longer to sell your existing home than you anticipated it would, and that you could end up being liable for two home loan instalments a month.

“Such double payments can add up remarkably quickly, and then you would probably feel pressurised to lower the price of your old home just to achieve a sale.”

Writing in the Property Signposts newsletter, Everitt says it is best to do some homework before making any decision. “Find out the current market value of your home from reputable estate agents in your area and quiz them about market conditions. Is it a buyer’s or a seller’s market in your suburb? In a hot seller’s market, the chances of a quick sale are much higher than in a soft buyer’s market.

“You should also establish whether there any problems with your home that could make it difficult to sell. Is it located across the street from a noisy school? Is it next to a busy freeway? Does it lack a garage or a second bathroom? Is the floor plan awkward?”

Armed with this information, he says, you will be better able to assess the risk of buying first. If it’s likely that your home will sell quickly, it may be worth the risk of buying before selling. But if the marketability of your home is questionable, you should really consider taking the more conservative route of selling before buying.

This article has been reprinted with the kind permission of Chas Everitt International.
Berry Everitt
011 801 2500           
www.chaseveritt.com

Home Loan Help for the Self-Employed

Changing economic circumstances and new lifestyle expectations mean more and more people these days are self-employed, as business owners or as freelance specialists who work on contract for a series of clients.

But even though many of them are high earners, they often find it difficult to get home loans, thanks to the fact that most banks still regard them as higher risk borrowers than corporate or public sector employees.

However, if you are self-employed, you should not give up hope just yet, says Berry Everitt, CEO of the Chas Everitt International property group. “There are ways for entrepreneurs to improve their chances of being granted a loan, the first being to get advice from an experienced mortgage originator on what size loan to apply for and how to first resolve any credit record issues that could count against you.”

Secondly, he says, if you are self-employed you should not even think of applying for a home loan unless you have all your business and personal financial administration up to date. “Remember, applicants in ordinary employment can usually provide pay slips, and income can be further verified by contacting their employer. With self-employed applicants, there are no third parties to provide such verification so lenders have to fall back on other proofs of income – and indicators of the stability of that income.

“So before you get ready to fill out that bond application, you should assemble all the supporting documentation that is likely to be required, including your annual financial statements and tax assessments for the past three years, bank statements and a cash-flow summary for the past six months, the most recent three months’ management accounts and a copy of the lease if you rent your business premises.

“You will also need a certified copy of your ID, a letter from your accountant attesting to your monthly income and a statement of your domestic income and expenditure.”

Writing in the Property Signposts newsletter, Everitt also says you will greatly improve your chances of being granted a loan if you have cash available to pay a deposit of more than 10% of the purchase price of the property you would like to buy.

“Lenders are much more inclined to grant loans to those who demonstrate financial discipline by saving a deposit and come prepared to invest at least some money in their own properties.”

This article has been reprinted with the kind permission of Chas Everitt International.
Barry Davies
011 801 2500, or visit
www.chaseveritt.com
Page Link: http://www.chaseveritt.com/html/press.html