If you cannot get the bond you want, investigate the other options
In the less affluent parts of the Cape as many as 80% of home loan applications are now being turned down by the banks and even in the primarily upmarket areas served by his company, only one in two applications is successful, says Mike Greeff, CEO of Greeff Properties.
Managing Director, Graham Leslie outlines three options open to those who, having been rejected, would still like to pursue the possibilities of buying a home - especially now that prices are real value levels and unlikely ever to be repeated after this year.
Option one, says Leslie, is to approach a friend or family member about getting a second bond or advancing a loan. "This," he says, "is a method particularly popular with parents of young married couples but it could - and should - be far more widely practiced wherever family members feel they can rely on each other.
"To make the deal attractive it may be necessary to offer a better than average return on the investment."
Option two is to find private equity, possibly, again, from a family member, a friend or a less restrictive private financer.
"Here the most popular method is to become a part owner in the house, possibly with a conditional clause in the agreement ceding the whole property to the financier if the bond holder defaults. That way whatever the outstanding debt, it is likely to be recoverable on the sale of the home."
The third option is to form a syndicate of three or more buyers who become the joint owners.
"In all these options," says Leslie, "you can benefit from the fact that interest rates will probably come down soon, adding an 8 to 10% capital gain to the investors stake per annum for the next few years, while paying off the bond month by month.
Syndication, he said, has become increasingly popular. In many cases only one or two members actually live in the home, the others accepting owner/tenant rentals from them while they wait for the capital to grow.
Quoting Warren Buffet, Leslie reminded investors that the traditional approach to finance has been,
"Don't save what is left after spending. Spend what is left after saving." - and one of the safest ways to save in these times, he said, is to put your money into property.
Article by: www.greeff.co.za