Thanks for dropping by Safe Investing South Africa. I am on a journey to build wealth my way. For any questions or comments, feel free to contact me.

31 Oct 2011

Early Retirement or Semi Retirement

Early Retirement Extreme
Depending on my mood or on the asker, I say I am on early retirement or semi retirement. Its quite scary to be outside of the formal employment, for some strange reason. But I find the new definitions of retirement (financial independence) less overwhelming. In 2013, when my loooong holiday is over, I have to take a decision whether I go back to work or make my retirement permanent. Whilst having those amazing options is great, its equally scary. "What if real estate investment world goes sour? What if the stocks we have are hard hit?" That should be normal right?

Personal finance blogs like Jacob, the author of the book "Early Retirement Extreme" have been my biggest motivation. Now I know its very possible. I have to admit though, I spent most of my life making extra income from my properties, and CONSUMING it at frightening rates. Whats with extravagant houses, embraced consumerism and 2 hour commuting days, just to go to work and back home. Lots of my money has polluted the air and caused some harm in the environment. Looking back makes me stronger though, so no regrets. Aren't I lucky that even at my rate of consumerism I failed to go into debt.

Now that I have my priorities straight, I am grateful to PF bloggers and random people I meet with amazing stories like the guy we met at my son's school fundraising event. He is an engineer the hubby once took me with to go see at his work. He tells us that he has walked away from his job because he doesn't want to be defined and limited by a box. I supposed that's a cubicle or corner office he is referring to. "So, what are you now doing?" I asked with my ears wide open (thanks to a noisy music background). "I am taking 2 months to myself, just to think of what I want to do with my life". Hubby was impressed by the 2 months, maybe a teeny weeny jealousy too. We never stopped talking about this guy for another day. The truth is that, most people cant go a week without their jobs. Yet this guy looked more alive than when I met him in his office, past his personal assistant. How liberating being at home with your loved ones is, as opposed to being in an office with a PA and people doing whatever you require of them. That's what I will choose in 2013. I will choose my kids, my family, my home again and again.

I will go back to work for 3 - 6 months in 2013 to tie loose ends or rather to loosen tight ends. So am I in Early Retirement or Semi Retirement? I don't care to define it, I am just enjoying myself, my family and my life. I love preparing a healthy breakfast and lunch snack for my son. I enjoy being there with a warm hug to welcome him when he comes back from school. I enjoy working with my daughter's noise in the background. My investments give me a cash flow which is 50% of my previous salary, but I am happier spending 50% less. I choose that. I am saving myself and the planet and that puts the smile on my face.

27 Oct 2011

How Much Rent to Charge

Determining how much rent to charge does seem easy, I know. Just survey a few comparables, look at what a neighbor charges and what the other landlord in the similar property gets...that easy. NO, in my 10 years as a small real estate investor, I find determining rental levels quite complex. Even when the property has been occupied by a tenant before, one cannot just assume that the last rental paid by the previous tenant, is the one to be asked from the next. The landlord may have to reduce the rent he/she charges because of the changes in the economic conditions, changes in the property and neighborhood, etc. Similarly, he/she can increase because of those changes or because when those changes occurred, he/she couldn't change the rent high enough for the tenant. (You may also be interested in my article on things to consider when buying a rental property)

Every time you have a vacancy, you go back to research on the "going" rental rates. Firstly, if you haven't already read our articles on preparing the property for rent and one on how to market a property, you may like them. Pointers to How Much Rent to Charge: 

Property Appearance from the Outside
  1. How the garden, paint, windows (and window treatments), design, driveways, etc, are, play a role in how much of the tenant's hard earned cash he is willing to part with. 
  2. Clutter in your driveway, porches or garden will cost you a lot in rental you charge. The house has to be de-cluttered to be shown to potential clients.
  3. The whole character of the building, even in multifamily dwellings will affect the rental rate.You will need to bring out the curb appeal of the property.
  4. Preparations for the show-house involve some work on the whole "look and feel" of the place. That's what prospective tenants see first, and we know how powerful the first impress ions are. 
Property Appearance from the Inside
  1. The layout of the rental unit may be outdated. One may think of changing the internal plan, if the rental increase justifies the cost. In some cases, a few dollars difference in rental doesn't justify the thousands of dollars to be spent on breaking walls.
  2. The piping and fixtures also have an effect on how much rent a landlord can charge. A house with outdated lamps is expected to bring in lower income than the one with modern chandeliers. A landlord has to keep updating the fixtures with modern and more economic ones. Older technology costs a lot more to use in electric bills, etc.
  3. Finishes are probably the most influential in the tenant's decision to take the place or "pass". Cracked tiles, missing wooden floor pieces, broken blinds, stiff door knobs, and hanging closet doors are not going to get you the best tenant, let alone your landlord neighbor's rent.
  4. The best views will earn you slightly more than your neighbor facing the cemetery. Pair that with a balcony with appropriate seating, and you score a great tenant and a few hundreds of dollars.
  5. De-clutter again. Nothing is as costly as clutter. Unlike buyers, prospective tenants wont look at the potential. Why should they look beyond clutter, when they have a few options?
More for Multifamily Dwellings
Some of the factors that affect multifamily units are not in the landlord's control. This is more so when the landlord doesn't own the whole building. The landlord should try to be active in the homeowner association (HOA) to have an influence in how the place is run and managed. The following are a few factors that determine "how much rent to charge":
  1. Cleanliness and appearance of lobbies and corridors
  2. Lifts, doors, stairs, floors
  3. storerooms, gardens, garages
  4. Employees and their attitude
  5. Noise, etc
As a landlord, you should keep up with the trends in the rental rates in the area where you have invested. I do that all the time. Even when I have appointed a property manager. As an investor, its in my best interest to keep with trends and changes that affect my investment. Now, let me go email the photos of the duplex that I have available from 1 October. It has to get a tenant for me to keep on building that emergency fund. The place was remodeled just over a year ago in preparation for the tenant who is leaving end of September. All I need is a reliable handyman to fix the tiny issues like window rails. And then the screening of prospective tenants begins.

Wishing you a great week ahead. Let me know how you also determine "How Much Rent to Charge" in your own properties.

4 Oct 2011

Tenants' Rights and Landlord Obligations

Tenants' Rights and Landlord Obligations
Over and above the tenants' rights and entitlement to certain minimum standards of accommodation, I would love to think that I go an extra mile to provide my tenants with comfort. I have never rented a unit I wouldn't occupy myself. I pride myself in that. I believe its for that reason that I received an email more than twice from my new tenant declaring her love for her new home... makes me happy. 

*to your left is the image of when this property was being remodeled in 2010. It was really bad*

Off course my tenant has filled my move in move out checklist and identified the following to be faulty.  

Tenant’s checklist
  1. Kitchen stove’s plug came off the wall
  2. Bathroom sink is cracked. It may start leaking.
  3. There is a problem with the bath drainage system. It is quite urgent.
  4. Guest toilet sink is coming off the wall and needs to be attached.
  5. All bedroom cupboard doors need to be replaced or re-attached. They are loose at the hinges.
  6. 1 bedroom cupboard shelves need to be replaced.
  7. The balcony door doesn’t close properly.
  8. Geyser (water heating) cupboard needs to be closed 
  9. The toilet seats in both toilets are broken
  10.  The bathroom mirror is broken
I may have missed on telling you that this property was completely remodeled just over a year ago to prepare it for rental. Why does stuff have so much short shelf life when it comes to rental property and tenants? I am happy that there is no major project, but the small repairs do add up and can become too costly.
Having a tenant who seems to be reliable helps though. I hope she keeps being that way. And a huge bonus is that I got me a handyman again. He came highly recommended. I don't think I will easily bounce back if he disappoints me. I trust the property manager who recommended him.

2 Oct 2011

Monthly Spending and Budgeting Report

Last month I started tracking my expenditure and drawing a budget, sort of. I am very glad I did. My impulsive spending has been tamed, remarkably. I even took over a few financial responsibilities from hubby's hands. Here we go:
Real Estate = 64%
Allowance = 22% (I get this from hubby because all work from home spouses do, I think.)
Online =13% (This is growing, makes me very glad. The $500 per month target is so close)
Surprise Dividends = 1% (not worth talking about)
Real Estate = 42% (about $300 more this month due to the added tasks taken from hubby's hands)
Gifts = 10%
Home Making = 6%
Small Investments/ Policies = 7%
Phone & internet = 2%
Loan to my small business = 9%
Left for Investments = 23%

I realized that other personal finance bloggers write the amounts. I don't think I'm ready to that for now. I am not frugal, I just work hard at increasing my income streams. I now have the luxury of working from home and spending a great amount of time with my daughter and son (after school). Nothing compares to that, but going back to work part time is an option that I never completely crossed off my list.
I did stick to my budget guide. Nothing beats writing stuff down to help one commit. I took over paying taxes and gas for our holiday place from hubby. Lets just say, we have to have this home. Its a necessary temporary expense.

I still cant believe I managed to remain with more than 20% of my income to invest or save. It makes me feel so responsible about my future and that of my kids.
A huge plus on the income front is that I got a tenant for the duplex that was to be vacant this month. Whoohooo! My new single mom tenant is happy and unpacking her stuff. Tomorrow is the day she sends me her wish list---SIGH.

I will be happy to maintain my budget as it is this month. I will be fixing minor stuff in the duplex which takes me a little out of my budget. This blog is my best time investment for the year.