Avoid buying a house in South Africa 

What do you think? Is your house a asset or a liability?

I read rich dad poor dad. I resigned from a good job to start a company. First 6 months I went from R40 000 a month to R2000. I stuck with my decision and did not reapply for a job. I did a presentation for a Engineer on a mine and he put my company on a trail to do the services I offered. I worked myself for 6 months on the mine. Then hurt my back at home and could not continue working. So after I recovered from my back injury I employeed 3 guys. They rendered the services and I could focus more on the business side of things. Today my company has 18 employees and growing. Moral of the story. Invest in cash flow. Like a monthly service. And don't quit. Pray and believe. You can do it!

I own a large 5 bedroom house with a granny flat which my wife and I bought in a very good neighbourhood. Its almost paid. Our bond payment equates to the rent of a small flat (mostly 1 bedroom). The best investment we ever made and best of all is that we will not be spending our pension on rent. Should we decide to sell, we can make a couple of times what we initially paid. If you use your house as your business address and deduct it from tax, you are liable for commercial rate on your property tax and that is far more expensive than a residential rate. It cancels out the saving on taxes. I am beyond the risk of loosing my house should I loose my job, but in the beginning we decided that should it happen, we would rent the property at 3 times the bond payment (which is market related in our area). Its a win win that took huge initial effort and is now a real asset.

A video on how to set up a trust must be on the way.

If you rent a house you are paying off someone else's house for them. Rent increases by 10% a year where as buying a house, the repayment will remain more or less the same for the following 20 years..

I bought a house for R1.8mil in 2021 on a mortgage and rented it out and now I'm selling it for R2.8mil without making any changes to it. I've also got a couple of other rental properties on mortgages that I'm very happy about. Buying properties in South Africa is definitely worth it.

"I beg to differ. Buying a house is an investment. If you don't buy a house, it means you have to rent, i.e., paying another person's bond. What is important is to buy a property that you can afford."

I have been in property investment for 25 years, today i have all my property in the market due to high costs and the way tendants are protected by our laws... At this moment in SA i would not invest in any property , i will rather rent a house and use my cash to fund my bussiness and get more return than leasing property.

The profit on a primary house is not really the value of the house - mostly, it doesn't appreciate that much. The profit is actually when you fetch the title deed of the property and you no longer pay anything except rates and taxes to live in the house you wanted in the first place. This takes quite some time, but when it happens it justifies the whole experience.

A house is still an asset even in current SA. Buy a house in a decent area and it should still hold or increase it's value after 15-20 years. Don't buy on credit!!!

Do not over capitalise. Do not speculate on property municipal property valuations. Remember, the property valuation depends largely on the municipal services to that property. Availability, means services not utilised but have been brought to the property by the Municipality. The next component would be the subjective location of the property. A 12ha property, unserviced, undeveloped (vacant) property,15 minutes from town has a R0 valuation. The market value of the property is what the buyer was prepared to pay for the land. So, for 5 years the rates must be calculated on R0, at the next valuation if there have been no change, the valuation should reflect the market value. Speculating on property valuations means that your appetite to make a quick buck by tacitly or proactively accepting a much higher property valuation regardless of how the Municipality (not the valuer) arrived at the figure, impacts on the affordability of neighbouring properties. Peoples are either compelled to sell or they no longer invest in their properties. Ultimately, it means that Municipalities (and agents) can manipulate the demographics of an area. Don't pander to the system. Gentrification is not a good thing. Imho, property should not be an investment class, as controvercial as that might sound.

Purchasing my home three years ago has proven to be the wisest decision I've ever made. Renting from others often leads to numerous challenges and uncertainties. Dealing with landlords who exploit tenants and restrict any personalization of the living space can be frustrating and costly. Having rented for most of my life, I understand the constant feeling of transience and instability that comes with it. However, since investing in my own property, I've experienced a newfound sense of security and pride of ownership. Not only have I enjoyed the stability of staying in one place, but I've also seen a substantial increase in the value of my property. In just three years, I've witnessed a significant appreciation, with the potential to walk away with a substantial profit should I choose to sell.

I love this advice, as a landlord, i encourage you all to rent, my house and 4 rental properties are paid for bringing about 60k per month. Ive minimised my personal rental expenses and maximizing the money you give me which i really appreciate 😂

Build a seof sustaining house that's what i plan to do in Kenya,n coz I've always worked from home n my land feeds me my land n house are an asset,investing in solar or micro hydro or wind power is no longer an option but a necessity,alongside methane micro plant,together with fruit trees n a garden,SELF SUSTAINABILITY is more than essential expecially with these inflation rates among other things

Its not always an either/or situation when buying a house (either an asset or a liability), even if bought in your own name. If you for instance have a granny flat that can be rented out to two students/working persons, that income can be paid directly into the bond. In the latter case the biggest challenge in my view is to minimize the long term losses suffered via the system of compound interest calculations. In simple terms: instead of paying the minimum of R10 000 pm towards the bond, the additional R5000 money from rent being paid towards the bond, will over 20 years save you hundreds of thousands of rands. Most people have no idea how this works.

I agree. The thing is what's more interesting to me is. The book The millionaire Fastlane by MJ de Marco talks about Robert, questioning his true business model, did he really made money from following the rich dad poor dad book principles? or did he make money of selling the book, then only practiced what he preached? But you are spot on in this video. Unfortunately the only way to become wealthy is self employment, where you have the scale of income on your side, making millions by selling to millions, then u save up, buy house cash. Compound interest don't work.. u want to live when u 30 not when u in a wheelchair 60. so only way is, impact millions and buy house cash.

Louis but I want a house in town because of the peace of mind. Rural life is awful. I need peace 😊. I'm in the process of leaving rural/township living for a quiet suburb in town.

Didn't do the trust thing but in my late 20's I bought a cheap flat in a crappy area with a flexi bond. I paid any extra money I had into the bond. Which is now mostly paid off but I keep it open to use later. I now have enough to buy a house cash if I sell. But will be digging into my flexi bond and buying a decent house and renting out the flat till interest rates start coming down and house prices increase at which stage I will sell the flat and pay off the balance of the flexi bond. It's been hard not to spend money on silly things but I've been disciplined. And now at 41 will soon have my own property and stop making the banks profits. Giving me more money to spend on my family.

Any land,building/ property is an Asset on the balance sheet. Thats where you log it. If you took out a loan to repay the asset then that is the liability. Your primary residence isn't a productive Asset to return dividends. If interest rates are low and cash is dirt cheap ,then its not a bad idea to buy a house as an asset because its kinda inflation proof. Not everyone has the capacity and the stress levels to open a business. Some people just want to live a normal standard life. Why pay someone else's bond when you can just live in the comfort of your own home and be stable.

We reside in Cape Town and I agree with everything you say, we own our primary house and have rental properties too, cash flow not best in CT but capital growth is best in Africa !!!

The best thing is to buy at a good surbub but don't live there, rent it out, then build in a rural area, then the house at a surbub generates income especially when it is paid up

Being 34, and top 1% earners based on stats. I can in all honesty say buying a house ONLY makes sense if you plan to stay there for 5+ years. Selling earlier knocks you on fees (Transfers costs, vat, Lawyers etc). Secondly, owning a property has no tax deductions, where renting has. This is only applicable if you have an office at home. Last, overhead of maintenance is a major expense owning, as well as additional insurances. Owning, should be seen as a convenience to do what you want (if free standing). You own nothing untill 100% is paid. If you want to own, buy cheaper apartments, and rent them out.

Really enjoy these videos! There is so many people with so many openions, but I enjoy the SA take on things. I’m in the financial industry and also have a property porfolio and sometimes its also nice to hear of things I have not thought of or went through. Keep it up💪

It's not only the financial side if things.i work from my house which I could never do from a rented house, flat or town house. The type of work I do requires me owning the house. You can't only look at it purely from a financial point of view.

I own property that is generating passive income for me each month. Yes there are fees involved such as maintenance, property tax and insurance. But it is a much safer investment than forex.

Love your work Louis. I'm here to learn. So, keep them rolling.

What gets me here its a bit of a clickbait! It would have been better to say something like ‘be educated before buying a house’ or ‘want to buy a house? Hear tihis first’ but no you want to entice viewers contemplating purchasing a home to the negative first. Other than that, nice synopsis of ‘rich dad poor dad’. Its a great book. I would advise all South Africans to read it. I think its a great enabler for upcoming Entrepreneurs…something we need of more here. God bless.

Yes, However, if you keep in renting and paying someone else for the roof over your head, expensively, you lose that money. You will never have a house if your own. Houses can be rented out later on...

Thank you for the video. Could you please explain renting from the trust? What is this process?

The way I see it is that rent is a fixed expense every month and is the max you'll pay - making it easy to budget and prioritize putting money into savings. With a bond it is the minimum you'll pay and becomes a variable expense each month making cashflow and budgeting difficult. I rent now (cheap rent) after owning a flat and a house. My living cost halved and I am able to follow a budget much better. Once I am happy with where my investment and retirement balances are, then I will look into buying a property again. There are many perks to owning, I just think majority of folks don't end up living in a purchased property long enough to gain from it financially. Purchasing property should be a 5+ year commitment to balance out the interest, lawyers and realtor fees...

Hi louis, something that i am struggling to understand. I recently bought my first property, i am looking to rent it out but the average rent in the area is lower than the mortgage loan payments, how do i go about making a profit or atleast be able to make minimum payments on the mortgage loan through the renter without digging into my salary to pay levies, W&E and the mortgage?

I love renting. I’m not tied down to a particular place should say a 🤡 like Malema move into the house next door. All my assets are liquid and I’ve no debt. I like the feeling of being light and free and mobile. Just my take.

I have never regretted buying. I have paid my bond finished. It its now worth soooooo much more than ever before. If I was renting I would still pay out the same kind of money. Yet now I have this asset which I am planning on selling and upgrading to a nicer house. My daughter has been renting for 10 years, moving every two years or so. It is terrible. Because rent keeps going up. She is buying this year. 🎉

Nice video. Please consider doing a video comparing rent vs bond, apples with apples, same standard of living (bond option will cost more). I believe that renting and investing the savings allows you to build equity faster than someone paying a bond. With amortization, you pay mostly interest for the first half of the bond term, whereas the renter has earned a lot of interest on the money hes been investing in the same period.

This is exactly what I did. I have two properties under my name. I don’t live in them plus they are self paid. I live abroad so this works out perfectly for me.

I see my house as an asset because, to have a roof over my head, I have to pay (Rental or Bond). So Id rather pay my accommodation costs towards owning my own house than paying off a landlord's property. So, if you see a house you live in as a liability, where do you stay? If you rent, you are throwing money in the water and get no future benefit from the money you spend each month.

The rental income is taxed in the hands of the Trust though. So, buying a rental property under a Trust does not entirely avoid paying taxed.

Been trying to explain this to my 65 year old mother who keeps imagining I am planning on buying a house soon.

I just bought a house and I fall on the middle class.... I do not have any asset

Let’s talk about trust. I have a property in mind to buy cash and am conflicted on buying it in my name, setting up a business and buy it under the business or start up a trust. I’m going to transition to working from home and what you just mentioned is a bit short of details. Please share tax implications and all.

Also…kind of lose the primary residence CGT benefit when you go through a trust for primary residence.

Lekker boet, I like the idea - didn't ever think about renting to myself. Next video you need to make is how you set up a trust and the operating costs associated with running a trust.

NB a retired person cannot afford to pay own trust a rental. This scenario can only benefit those people who earn good monthly salaries

First things first. Location, location, location. I built 6 years ago, so no transfer fees. Since then the value has increased annually 4.5% on average. Not a lot in terms of investments (never mind inflation), but okay versus most of South Africa's property values. However, a neighbour who rents would have paid R1.8m during the same 6 years in rent. Simple maths, I would rather be in my position.

I do enjoy the experience you give us,thank you

Well you can also be smarter and buy vacant land and build your own house for way much cheaper, at the end of the day you do not want to live in someone else's house. But I agree with you, you buy/build your own house with the income you generate with your assets (cash flow). Safe haven comes first, doesn't have to be fancy, just has to be a place where no one can kick you out.

@louis would be good to build units/flatlets in one's backyard and rent it out

The bank will usually sell a bond protection insurance against job loss etc, so you should not lose your house if you lose your job. There are downsides to opening a trust.

If you can afford to buy a house, buy a house. Unless you like moving every year, which can happen when renting since owners can decide to sell or hike rent so high you rather move. Listening to Rich/Poor Dad dude is not wise since I doubt he has South African market in mind. But, to each their own.

Definitely a asset if you do it RIGHT....In todays economic climate one is screwed either way, whether you renting , buying to live in or Buying to let ( each has it's PRO'S and CON's.....Here is some FREE ADVISE to any young individual or young couple...1stly if you just started working, DONT buy a flashy car... PUT YOUR PRIDE in your pocket and move in with your parents or inlaws if you can.. This will FREE up the funds you would have used to pay a bond or the rent you would have paid. BUY A PROPERTY. Rent it our for a year or two..... SELL THE PROPERTY, make a few rands ( hopefully a few thousand). You can either repeat the process again OR if you GATVOL with living with your parent , use the PROFIT you made as a deposit on your next purchase which should allow you pay a few bucks less on your bond than what you would have paid should you have bought a property the 1st time with living with your parents.........

I did the same, but in my business. Trust owns my business though

Where would you live ? Would you rather live in a place that you are paying for or would you pay rent to someone else who owns the property ? If you pay for your own place you are in the long run not going to have to pay rent . You will always have that expense of living. Would you rather pay it to someone else and have nothing to show for it ? ( It will be a expense for as long as you live because you need a house. ) or would you buy your own place ?

Good system! You will miss out on the primary residence capital gains exclusion when you sell however. That’s the drawback of owing in a trust and claiming home office expenses.

As a professional, it would be a liability to own a house in the event of litigation. Not saying that its a bad thing, but as a young person, that is worth considering and a trust is definitely a good thing if one were in the market to obtain a bond. Yes, I said a bond, not a house. After 20 years its your house, but for now, keep paying the bills till you're 50+. I have reservations about bonds and the risks involved. Repossession is scary especially nowadays with ever increasing retrenchments etc. There are lots of people advocating for renting rather than buying and that is complicated topic on its own. But Less risk, compared to a bond. food for thought.

Took some really crap advice as a young adult. Listened to an old fart on the radio. "Don't buy property, invest in well managed SA companies". Young me does exactly that.. Looked at what great companies there were to invest in. Wow Steinhoff is looks amazing. Put a big portion of my hard earned money in it instead of putting it down on a deposit for a flat I could rent out. You all know the story from there. First scandal of our "un-corrupt" private sector. Rest of my portfolio was just meh. Did I take all that money and invested it in a small property in Cape Town at the same time and rented it out, like some of my friends and my mom did, I would have been way better off. Guess what my mom sold her flat there for a R1.2 million rand more than she bought it for in a matter of 3 years. Same happened up from Cape Town to George. Prices flew up all across most of the Garden route. Yes don't go buy property on a turd farm or in some shitty neighborhood in Gauteng as an investment. But don't listen to old farts on the radio either. Do your own research, and buy smart. How did the JSE compare to the Nasdaq etc over the past 5 years? SA businesses are the shittest places you can invest your money in compared to other avenues. I'm made a killing in crypto over the years. Can't even begin to compare the returns. Obviously be careful and don't throw money at it you are not prepared to lose, and know when to get out.

I needed this video.. because we actually planning on purchasing

Well, I purchased a property (prime residence) ... after paying it in full, saved to purchase an investment property (bought it cash). Best decision ever. If you do it RIGHT, investing in 'bricks and mortar' is still the best (and safest) way to invest your money.

Hi Louis, any pointers to where I can get some guidelines on setting up a trust and buying property in South Africa with foreign income? TIA

So what are you saying? Rent and never own a house so if you lose your job you get kicked out on the street? Usually there are insurance that you take out to help if you can't make payments. When your bond is complete there's no more worries about paying the bond whereas when renting you pay forever what you saying doesn't make sense especially when you retire where are you going to stay

Hi Louis, Thank you for this video. I have been asking around for someone to help me make sense of the equity a property creates when it has appreciated. But no one can really tell me about it. I want to know how can I practically access the equity in my property and what is the processes, because according to my banker it is not possible. Please explain it to me like you would to a Grade 5 learner.

Can I set up a Trust and apply/qualify for a mortgage bond?

Thank u eye opening content can u plz show us how to set up a trust

Its not possible to deduct all your rent as a business expense even when working from home, but only the space that will be used to conduct business. Great info otherwise

Buy a house. There is a lot of people that cant afford to buy through bank. Then rent it out. They pay it for you. Then you rent a smaller place for yourself and get approval for a another bond. Even if you sell your place. No investment or bank will give you that money in interest.

Hi Louis, do you mind commenting on this please? Trust is taxed at 43% flat rate and CGT is 80% of the gain is taxed at same rate . You totally lose out on the R2mil exemption of primary residence.

Offloaded my house 3 years ago, best thing ever. They can't take what you don't have

Especially in this country

Great content as usual. Do you provide any sort of mentorship or consultancy services?

Thanks for the information

Hi louise, thank you for your videos, very educational. how do I contact you?

Could you please elaborate on the process of convincing the bank to transact with the trust instead of you. Do you need to sign as surety? Do you have to put down a deposit (mandatory)? Just trying to understand how banks react to this strategy 😊

Why rent and pay someone’s else’s bond?

I can indeed confirm that this man is a South African 😂😂

im confused, so u save on taxes because u claiming for rent due to workfromhome/business owner, but on the Trust side, don't u need to then declare the rental as an income and then that income get taxed? if so, would this not be the same tax expenses?

18 YEAR OLD kids today have access to all human knowledge and should learn from day 1 how to survive the adult world and finance. we did not have that in 2000 at 18 so clearly wish i knew then how to set up for quicker financial success. and go for it

What about taxes on the trust's income? What sort of trust is it and are the beneficiaries? Also, how material is the tax deduction from what you pay to the trust given that rent paid for a home office is tax-deductible only in proportion to the floor area?

Simple solution:buy a house with cash🙂

I do not agree with the trust strategy. With the new beneficial owner compliance in place its very easy for SARS to see when you are deducting expenses from the property in you own name. Meaning if the Trust is the lessor and you the beneficiary/trustee act as the leesee SARS is able to reverse all the deductions claimed and penalise you for claiming them. It is usually seen as evasion rather than tax avoidance. That's if I understood the strategy in this way.

Is a trust the only way to go about it or does a pty ltd has the same property as a trust?

Hi Louis. Is it possible to transfer ones house to a Trust if one has a bond in their name with the bank? And will there be a tax implication cost in doing so as far SARS is concerned? Thank you for the great content as always on your channel.

Awesome video. Can you do a video on trusts. What happens to the trust eventually? If the house is paid up or you borrow against the trust. Will that not count towards tax. What is the benefit then. Thx

Being in South Africa is a liability, for all your assets, life and health included.

I'm hungry for knowledge like I'm hungry for food.

So you will rather just pay rent ? Not me !!

Great insight ... can you take us through the process of starting up trust in South Africa??

I believe you speak with facts brother, this is based on a true story

Can one move their property into a trust after purchasing the house?

Thanks for the video,could you please break-down the numbers too in owning a residential home in a trust.

What are the costs involved in setting up a trust like this?

Nah this isnt generic, you cant say your renting should be equal to what you will pay for your house. Renting in SA varies significantly, and ts not comparable to paying for a house in a way. Im currently paying R2000 for my rent montly, decent outside room with showe,small kitchen and built in cupboard. The house I want to by will roughly costs R7000-R8000, so see the difference. Secondly, where will you get a bonf house for R2000 montly?

Its easy when you inherit some property...

To make money you have to spend money, the average middle class Joe has to take on a liability to get an asset that's how it is. you have a choice take a chance on a house loan to get the property or help someone else get it worry free. You'll lose the money either way. Why not take the risk to own it some day?

Buying a house is a bad idea

How much does it cost to manage a trust per year?

Where can one go to do a credit check?

Although I own my house outright, I agree, it's a terrible investment and a really big money pit. One unfortunately need at least one place to live. I'd much rather have this capital in the S&P500

The main emphasis for any reading this comment should be increasing their cashflow. Property is a mindset decision more than anything and one can argue to rent or mortgage it. Regardless, your decision should steer you towards increasing your net income and net worth.

get a house if u can. guess what if you retire and your money dries out you always will have the house to fall on.

My (old) house is costing me on maintenance.

Just buy land and build your own house, and then you can rent wherever you go,