how to buy a house | may 2016

How to buy a home?

Introduction

WHY

1. Wealth Wealthy

1% Financially independent 5% Still working

16% Dependent on the Government 52% Dead

26%2. Who wants to be wealthy?

3. Ignorance Difference between truth & perception

4. Knowledge

“The right information at the right time is nine tenths of any battle!” Napoleon

“Knowledge is Power!”

“Informed Knowledge is Power!”

Who is involved? Seller – individual or developer Buyer – individual, company or trust Estate Agent/ Developer Banks• Buyers• Sellers Mortgage Originators Lawyers Bond Attorney Transfer Attorney SARS / Tax Offices Deeds office Municipality Body Corporate

6 Steps to Purchasing Property

Strategy

Find

FinancePurchase

Manage

Decision

Decide

Biggest inhibitors• Time• Lack of understanding• Fear• Knowledge• Money Law one ”Invest in yourself!” Get involved

Strategy

Very few people have a strategy – it is adhoc purchases and based on friends advice!

Most people buy houses they want to live in, not the best investments.

• Do you buy shares in a company you would like to work in? UK Market – early 1990’s is a very good example

Strategy

Strategy

It is all about the financial numbers What is the worst case scenario? Property has increased by 12% in SA and 9% in the UK &

USA over the last 30 years with inflation being 9% and 3% LONG TERM INVESTMENT REAP example

REAP

It is all about the financial numbers What is the worst case scenario? Property has increased by 12% in SA and 9% in the UK over

the last 30 years with inflation being 9% and 7% LONG TERM INVESTMENT Property Pro example

Multi Tiered Strategy

Top+R2 million ($200+)

MiddleR1 mil – R2 mil ($1m to $2m)LowerR500k – R1m($50k - $100k)

Key highlights

1. First project when I was 13

Key highlights

2. First property when 22

3. First London property when 24

Key highlights

4. Thousands of South African Investments

Key highlights

4. Hundreds of London / UK Investments

Key highlights

Key highlights

5. Hundreds of Australian Investments

6. Hundreds of American Investments

Key highlights

7. Not just residential, both commercial & industrial

Key highlights

8. Commercial with $10k

Key highlights

Off plan vs Bricks and Mortar

Transfer Fees Cost of Capital – see example Speculation Time to save Cost per square metre Buy at today’s prices Start paying it today

Find

Know what you are looking for! Key decision:

a) Buying as a house to live in Emotional purchase Location Location Location Schools, offices, shops, entertainment, hospitals, security,

transport, etc.

b) Buying as an investment property Does it fit with your investment strategy Are you trying to achieve capital appreciation or passive income

form rental? 100 Point System

Global Investment Due Diligence System (Big Data Analysis System)

-International currency movements & impact analysis-Macro country based scenario planning -Financial structure optimization system-Country development partner trust assurance system-Micro city based scenario planning (scores the best suburbs to invest in)-REAP - Property investment yield forecasting tool (cash flow, tax, IRR)-Pre-Purchase Due Diligence (Fraud prevention, Property condition, Appraisal) -REMS - Maximize your investment through ongoing management-Wealth Assist Solution - Live & online customer assistance call center, 1to1 support. -Customer Experience - Secure apps, secure investment platform.

1

2

3

4

5

6

7

8

910

GIIDSOur Secret Sauce:

Where to invest?

5 continents, 9 office locations, truly global, on-the-ground teams.

THE GLOBAL SOLUTION – Wealth Migrate

Clem Sunter

Endorsed by 40 Global Leaders and Property Experts!

Global Scenarios

Clem’s scenarios

4 Dimensional Model

Global Property System (GPS)

Find

Dolf De Roos - To find a deal one needs to:• View 100 properties, • Make a offer on 10• Be accepted for 3• Buy one!

Law Two – “Always buy property with a twist” Law Three – “ Always buy from a motivated seller!”

Some things to consider

New developments in growing marketsBuy a property tomorrow at today’s pricesPhase 1 = usually best value

Worst property in the best streetRedevelopment / Refurbishment

Older areas undergoing redevelopmentUrban regeneration: Johannesburg & Cape Town CBD, Kelvin,

Woodstock

London, Zone 1, 2, 3 Added infrastructure

E.g. New tube stations, shopping centres, GauTrain

Finance

Can you get a mortgage? How much? Law Four – “Always do the financial analysis before one

buys!”• Know what you can afford• Do preliminary financing• Do financial modelling on all perspective property

purchases• Understand all the costs

Law Five – “Look at cash flow first, then capital appreciation!”

Power of leveraging

Bought July 2008 R750,000 Market

Transfer Costs R12,500

TOTAL COST: R762,500

Value in July 2009 R840,000 (12% growth)

Profit R77,500

Growth (ROI) 10.16% = Profit / Cost

Excludes agent fees etc

Power of leveraging



10% deposit R75,000 90% Leverage!

Bond & Transfer Costs R19,000

TOTAL COST TO YOU: R94,000


Profit R71,000

Growth (ROI) 75.53% = Profit / Cost

Power of leveraging



10% deposit R75,000

Bond & Transfer Costs R0 Off Plan

TOTAL COST TO YOU: R75,000 No Costs!


Profit R90,000

Growth (ROI) 120% = Profit / Cost

What does this mean for you?Check the numbers!

Banks consideration for a mortgage

The property itself: value, area (risk) Insolvent / Criminal Record / Judgments Credit Rating (www.credithealth.co.za) Income Statement: Income & Expenses Balance Sheet: Assets & Liabilities Suretyship Qualification, Job Industry & Position

• Earning power in SA? Other property in South Africa All this affects offer of loan amount + interest rate

granted Income vs Asset Based Lending

Schedule of how much you can borrowCalculated at 11% over 20 years

Purchase Price Bond Amount (10% deposit) Gross Income Needed Monthly Repayment

R200,000 R180,000 R6,500 R1,950

R300,000 R270,000 R9,500 R2,850

R400,000 R360,000 R12,500 R3,750

R500,000 R450,000 R15,500 R4,650

R600,000 R540,000 R18,500 R5,550

R700,000 R630,000 R21,500 R6,450

R800,000 R720,000 R24,500 R7,350

R900,000 R810,000 R27,500 R8,250

R1,000,000 R900,000 R30,500 R9,150

Types of products

Variable rate Fixed rate Access bond facility (Standard Bank),

Flexi Bond (Absa) Accelerator Bond (Absa) First time buyers mortgage (used to be

able to get 108%) Interest only mortgage (not yet in SA)

Purchase

Some manage to persevereOur first example

Law Six – “Property is secured in law, but it is relationships which bring in the money!”• Negotiating• Sourcing• Managing the process• Management

Law Seven – “Be in control, manage risk!”

Purchase Process

1. Signing Offer to Purchase (OTP)• Subject to finance• Use sellers bond agent

2. OTP accepted by seller• 7-14 days for deposit• Up to 30 days for mortgage approval

3. Complete bond application with supporting documents

4. Accepted OTP is returned5. Send FICA to both attorneys6. Sign bond & transfer Docs

Costs Transfer Duty (Individuals)

Deeds Office search fee Deeds office fee Bond Attorney Fee | Can be included in price on new

builds Transfer Attorney Fee | Can be included in price on new

builds Post & Petties

Value of the property (R) Rate0 – 750 000 0%750 001 – 1 250 000 3% of the value above R750 0001 250 001 – 1 750 000 R15 000 + 6% of the value above R 1 250 0001 750 001 – 2 250 000 R45 000 + 8% of the value above R 1 750 0002 250 001 – 10 000 000 R85 000 +11% of the value exceeding R2 250 000 10 000 001 and above R937 500 +13% of the value exceeding R10 000

000

Bond Initiation Fee (± R5,700) Valuation Fee (± R3,000) Rates & Taxes (possibly upfront) Levy Clearance Certificate (± R450) FICA Fee (± R250) Other incidentals (± R5,000) Notary fee

Costs

Tax

Own Name Partnership CC Company SA Trust Offshore TrustTransfer Duty 0-8% sliding scale 0-8% sliding scale 10% 10% 10% 10%Income Tax 0-40% sliding scale 0-40% sliding scale 30% 30% 30% 30%Tax on Distributions 0% 0% 12.5% 12.5% 0% 0%Effective Tax 0-40% sliding scale 0-40% sliding scale 38% 38% 40% 40%

Primary ResidencePrimary Residence

Capital Gains Tax

i) Income generating property

investment portfolios,

shares held by a trust ii) Property clubs,

syndicates

Primarily Used For

15% 15%25% of gain at your marginal rate - effectively 10%

25% of gain at your marginal rate - effectively 10%

20% 20%

i) Primary residence ii) Non-income generating

properties iii) holding vehicle

Law Seven – “Optimise your tax and financial strategies!”

Tax implications on rental income (SA=source based tax system)

SA tax number essential (IT77 from www.sars.gov.za)

Capital Gains

% of gain Tax Rate Effective CGT

Individual 25% 0-40% 0-10%

Company / CC 50% 30% 15%

SA Trust 50% 40% 20%

Individual’s CGT Allowance• Primary Residence• R2 million allowance per family, i.e. not R4m per couple• No other primary residence, temporarily outside the

country

Manage

Managing your tenant• Ski slopes of Switzerland• Friends and family?

Be careful not to underestimate time, cost & frustration involved

Avoid vacancies!• Missed rent• Management fees• New tenant = advertising / finding fee• House-cleaning costs• Possible damage

OLD SYSTEM IS BROKEN

* 2015CF-RE Crowd Funding for real estate, Massolution.com

Don’t Trust the systemPeople are tired of being poor, with 76% of people in USA being concerned about their future and only ¼ believing in the financial system.

Little to no TransparencyYour money is put in structures which are very complex and you have no idea what property you have invested in, have no control and most importantly don’t have access to the actual numbers.

Higher fees, lower returns, no AlignmentThe returns are low, due to the excessive fees of middlemen, who dilute the return and result in less than 1% of people in the Western World being able to retire wealthy. There are too many people between you and the property, with interests not aligned.

COMPETITORS

The two leading crowdfunding companies, Fundrise and Realty Mogul, have 42,936 and 12,000 active users respectively, and have recently

raised $142m and $82m. Neither operate outside the US.

THE PROBLEM - GLOBALLYMiddle-class Real estate investors are recognizing the power of real estate crowdfunding, but do not yet have an easy & safe way to invest in global real estate markets.

Limited to “in-country” deals only, causing currency and diversification risks.

Barriers very high to buy & manage offshore.

Offering global deals is extremely difficult. (legal & banking, trust, compliance; deal quality, partners, language)

1 2 3

5 continents, 9 office locations, truly global, on-the-ground teams.

THE GLOBAL SOLUTION – Wealth Migrate

OUR STRENGTHS

Striving to build a trusted, simple, and transparent marketplace for investors all over the world, of all investment experience levels and of all financial calibers

Geographic diversity reducing systematic risk

Onsite due diligence for each property

Only invest in unique properties

Monthly updates Automated ‘bad

actor’ and security checks

Investments start at USD10,000 only

Leverage on our partners’ expertise

Dedicated education portal for existing and future investors

9 offices over 5 continents

Focusing on USA, UK, Australia and Africa

Investment Committee invested USD1.34bn in more than 10,800 properties to date

13% + rate of return Invest based on

income-based returns

Investors see returns first

Reduced operational costs

Stable short and long term income

Investors & Members Global Presence Risk Control Stable Return

Expanding user base through strong international presence, variety of interactive events, and existing users’ word-of-mouth advertising

INVESTORS & MEMBERS

Established and constantly expanding relationship network with world-class real estate players to source investment opportunities of the highest quality

REAL ESTATE PARTNERS

How we connect themOUR PLATFORM – Web & Mobile

REGISTER AND VIEW

Provide a verified e-mail address will gain immediate access to

carefully vetted global real estate investment

opportunities

SELECT AN INVESTMENT

Choose an investment that is most suitable

in terms of type, location, investment

amount, risk preference and return

targets

TRANSACT ONLINE

Complete the entire process including legal

document signing online and funds

transfer

MANAGE PORTFOLIO

Access personal investment

dashboard, receive investment updates, tax documents and

review return distributions

21 3 4

Easy to use and simple to understand portal designed to maximize user experience and satisfaction

How we connect themOUR PLATFORM

GLOBAL PORTFOLIO DASHBOARD V.2

AFRICA & SOUTH AFRICA

SOUTH AFRICAFSBTiming

Conclusion

49% of the world’s wealth is in property!

"To become financially independent you must turn part of your income into capital; turn capital into enterprise; turn enterprise into profit; turn profit into investment; and

turn investment into financial independence."

Jim Rohn

Strategy

Find

FinancePurchase

Manage

Decision

Client

Partners

Wealth Migrate

“Whatever you do, or dream you can, begin it. Boldness has genius, power and magic in it. Begin it now!”

Johann Wolfgang von Goethe

VISION

VISION – “A Family office in everyone’s pocket!”

“Dream big, people become what they dream!”

Questions and Answers

how to buy a house | may 2016

Real Estate