Ready or not!
There are only two things we can be absolutely certain of in life. Repeat after me…death and taxes.
Since we all know that tired old saying, the question becomes - why we don’t discuss it, plan for it, own it and prepare ourselves for it?
Let’s consider Patricia. Her husband, Sheperd, was murdered walking home from work on 15 May 2017. One stab in his neck, just above his collar bone and it was all over. Murdered for his wallet and cell phone. His accounts were frozen but his financial responsibilities were not.
On the 25th May, the bond should have been paid. But it wasn’t because his account was frozen. No debit orders allowed! On the 5th June, the final date for bond payment – what do you think happened? Again, no payment made.
On 19th June, Patricia gets a call from Doris from FNB. Doris demands to know why the bond hasn’t been paid and when Patricia tearfully recounts the story, Doris yells at her.” You should know better! You must tell the bank if he dies! We need to know this sort of thing.”
Patricia, still reeling from the brutal death of her life partner, is stunned. She is trying to adjust to being left alone with two young children to raise on her own. “I just didn’t know Tanya. Sheperd was a good man. He took care of me, he sorted out ALL the finances. Everything was in his name. I don’t want to move the car to my name, the medical aid. I don’t want to deal with these people, I don’t know anything about this.”
What can you do to prevent yourself from this kind of pain? The pain Patricia felt and the pain Sheperd inadvertently caused.
You need to become financially aware. This is YOUR life and you need to know and understand everything about it.
And you need to protect your assets. A lot of you and young and are building up your wealth but have you given any thought as to the structures you can use to protect that wealth? To protect your family?
One of the most important considerations when investing in property is to decide what vehicle to put the properties into.
This decision needs to be made before you actually sign the offer to purchase. In this series we will look at the following forms of ownership:
First, we talk Partnership:
I am going to make this really easy on you. Don’t invest in a partnership. Not EVER. It is too casual and will end in tears. I know I know, you and Stacy have been friends since preschool and nothing could ever come between you, you have navigated every hormonal storm the world could throw at you and STILL you remain besties. I STILL say don’t do it.
Let’s pretend you ignore me and skip off to buy a cosy little one bed, one bath apartment in a popular suburb with high rental demand. You agree to share the expenses and split the profit. Once you take ownership of the property, you realise the kitchen needs more work than you imagined. Stacy wants to replace the kitchen counter tops with granite and you lean more towards an affordable formica. Stacy fancies slate tiles on the floor, you think vinyl tiles would do just fine. Who wins the debate? Over a glass of chardonnay, you find a way to navigate this storm and settle on a granite Formica finish because #besties.
But then in 5 years time, Stacy meets Pascale and falls madly in love. He whisks Stacy off to France and they decide to go live in Provence and grow grapes for the rest of their days. Stacy tells you she wants to sell the apartment, she needs the cash to pay for the expenses related to her relocation. You love the regular monthly income the apartment provides so don’t want to sell it. Who wins this debate?
The lawyers win this debate. Because there was nothing formal in place, no clear rules of engagement it all goes down to who can afford the best lawyer.
If you want to buy a property to hold and rent out (buy to let) you should ONLY do it alone or at best, with your spouse. Plans change, people change, minds change and property can cause the collapse of a tightest friendship, yes EVEN between Stacy and you.
Sure, you can flip properties with a friend. Buy a property, fix it up and then sell it for a profit. Go right ahead, be my guest. That’s totally doable for you and Stacy. Buying to hold – nope, no one else needed or wanted thank you very much. Just numero uno. Just YOU.