Live Deal Analysis (Gauteng - Forest Hill)

[@koketsoletlapeYT]

Great video! I'd like to understand how you estimated the 12% loan interest rate? .

[@myappproperty]

Usually when you are getting a loan on a mutli-let, the banks will charge you commercial terms. A commercial loan tends to provide a lower LTV (Loan to Value) and higher IR (Interest Rate). The 12% is more an assumption. Usually a commercial loan has an interest rate of prime + 3%. I would recommend that you go to your banker to find out exactly what terms you qualify for.

[@myappproperty]

Usually when you are getting a loan on a mutli-let, the banks will charge you commercial terms. A commercial loan tends to provide a lower LTV (Loan to Value) and higher IR (Interest Rate). The 12% is more an assumption. Usually a commercial loan has an interest rate of prime + 3%. I would recommend that you go to your banker to find out exactly what terms you qualify for.

[@robertvanwyk4300]

Hi Laurens, great insights as usual thanks ! I just want to understand your reason for estimating such a high interest rate of 12%. Prime +5%?

[@myappproperty]

Commercial loans tends to provide a lower LTV (Loan to Value) and higher IR (Interest Rate). The 12% is more an assumption. Usually a commercial loan has an interest rate of prime + 3%. As much as the interest rate is 7% today and super attractive, I believe that it won't stay that low for long. As the economy recovers the SARB will likely increase the repo rate. Therefore, I prefer to work on a conservative model of 9%, instead of 7%. If the deal only works because of the competitive interest rates, then I don't think it's a good deal. Anyway, I would recommend that you go to your banker to find out exactly what terms you qualify for and use actuals. I use a lot of assumptions for these videos, but you can't make a buying decision on assumption.

[@robertvanwyk4300]

All clear thanks man, makes sense.

[@brynanders5528]

Hi Laurens, Thanks for another great video. My question is related to your legal structure used to purchase and manage the properties. In this video and other property evaluation videos, you always select the "company" option for tax purposes....so I'm assuming you are purchasing through a company. I watched your video that you did with Thierry on tax efficiency...and I it seems as though your preference is to purchase properties through a company - is this accurate, and if so, can you tell me why? I am looking at 2 options at the moment: 1) Property Trust (on it's own) 2) Company with 100% shareholding in a trust. I'd be very interested to hear your thoughts on on this.

[@myappproperty]

Hi there, I personally prefer companies because they are flexible, easy to setup and manage and they are cheap to start with. A trust is great when you have alot of wealth to protect, but it's really inefficient if you don't have wealth. If you have 1/2 properties, it really doesn't make sense to purchase a trust, which is going to cost you R1k per month to manage. If you have 5 properties + and making lots of cashflow, then I would recommend a trust. It is also clever to have the shares of your company owned by a trust, as you get to participate in the companies tax efficiecies while getting protection. As always, please contact a specialist (i.e. tax advisor) before making any decision.

[@brynanders5528]

@@myappproperty Thank you, appreciate it.