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13 Sept 2012


Only the other day I wrote about the possible effects of rising petrol and diesel prices on household income and expense. I was giving it a week or two for the food prices to follow suite. It turns out my property investor self is feeling the pinch even earlier. One of the units is in the complex where they outsource the municipal services. Its the most efficient service ever, I must add. This morning I woke up to the contracted company's communiqué through our complex managing agent. Here goes:

"Dear Customer
Yearly Price Increase

Please note that due to increase in labour, Municipal dumping cost and the drastic increase of fuel, our monthly service fee will be increased with 20% from 1st October 2012.

You are currently paying R43.56 (excluding VAT) per dustbin, and will be paying R52.27 (excluding VAT) per dustbin as from the 1st October 2012.

Be assured that our prices are always market related. (Municipal increase in 2011 was 17% and our's 10%. In 2012 Municipal increase was 25% and our's 20%).

Municipal Dumping costs: 39% increase
Diesel: 15%
Lone: 10% increase
New Municipal bylaw to Global Waste: 200% increase
Please contact us for any questions at XXXXX

Thank you"

Notice how the government, though the municipality is stealing from me. My initial thought was OMG, I don't want to be this company, R52!!! I then quickly did my sum. The company takes minutes to go through close to 100 dustbins in our complex. That's close to R5 227. Only a few minutes because a few units may be vacant, our neighbours use their unit as a holiday home and every week one occupant may be away for one reason or another. When I lived in this unit, I saw the guys going through the whole complex in an amazing speed. Lets assume that they do 10 complexes per truck per day...that sounds optimistic, I know. Thats about R52 270. And then make it 5 days per week ...R261 350 per week. That translates to R1 045 400 per month and finally R12 544 800 per year, per truck. I know, I'm crazy. I do this all the time. In case you needed some convincing to get in that kind of business. Although one needs a truck and lots of hands, then some computer to send emails similar to the one above, LOL. This business is still not my cup of tea though.

Back to the dent in my income. It may look like a tiny increase at a glance. However every Rand adds up. I already received the levy increase for another unit yesterday. Definitely due to fuel price increase. The tricky part is that, you don't necessarily increase the tenants' rental with every increase in costs. You take some of the fall "like a man", re-adjust your life and move on. You look at the market trends to see if its feasible to build the increase costs into the next increase. Its sometimes not. Rental prices rise and fall with the economic trends. Its not as easy as people assume it to be. At least not anymore.

Its actually tougher when one owes too much on their mortgages. Interest rates are at their 40 year lowest, but that can change. If you are an investor and feel the relief from the low interest rates, it could be time you visit your bank to fix your rates or re-finance at a lower interest rates.

On another note, my current transaction in progress is looking OK. The lawyers/ conveyancer contacted me. I will keep you on the loop. I also wanted to tell you about my experience with the personal advisor consultation I had years back. My first and only time I hired one. I never followed the advise but it helped me think differently about my finances. That's my next post. Come back.


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