My Triple R Principal of Investing
Posted by Jacques Fouché (19 December 2017)
Hi everybody this Jacque Fouche.
Today we are talking about the TRIPPLE R PRINCIPAL OF INVESTING in buy to let property. and how anyone can build a multi rand asset base by following these 3 simple steps to wealth creation.
I know you have great ambitions, goals and aspirations in life, just like I do, you’ve got ambitions to become a successful investor, to build your wealth, build your career to contribute to give and to leave legacy one day.
But all of that is impossible without a strategic approach to building wealth through real estate.
If you don’t have a strategy or understand the bigger moving parts and what the overall pathway is towards building a real, real estate investment business, it’s going to be tough to ever achieve your goals.
Many investors don’t understand how to get their portfolio build so that they can achieve the lifestyle and level of income they desire.
So I am going to explain my very simplistic TRIPPLE R investment strategy with you.
That you can practically implement and follow to become a successful investor, using minimum of your own money and taking a minuscule risk.
By focusing buying right ASSETS( A-GRADE investment properties) that generates CAPITAL GROWTH- you will create EQUITY – we want to create equity, BECAUSE THE EQUITY/CAPITAL will be CONVERTED TO CASH FLOW/passive income at a later stage of the game.
Buying High growth ASSETS…. That’s Providing – CAPITAL GROWTH…….. Creates EQUITY………. That Produces.CASH FLOW-
- You FIRST RETAIN – the asset(don’t sell it)
- REFINANCE-unlock the equity within the asset
- REINVEST -Roll over the equity to buy more assets
that’s how you build a substantial asset base- and do it FREE OF TAXATION.
Lets go to the first of the R
- RETAIN – the asset, don’t sell the asset.
Biggest mistake investors make is they sell their properties when their properties are starting to perform and producing positive cash flow. They think the only way to make money is by selling their property. How wrong are they?
Big Negative consequences occur when investors sell their property.
- They never build a portfolio, they always end up with only one or two properties and unfortunately they normally sell their best performers to subsidies the bad ones.
- They pay capital Gains tax to sars
- They pay estate agents commission
- They pay bond cancellation fees
- The worst of all is that never ever again will that property work for them again and never will it produce rental income neither capital growth.
The asset has died.
So please please don’t ever KILL the goose that lays the golden egg.
We don’t want to eat the goose meat nooo nooo noo. We want the golden egg. We want the EGGUITY of the goose.
So if we are after multiple golden eggs—- We need many geese to lay those golden eggs for us isn’t that so.?
We need to buy multiple geese so they can produce multiple golden eggs for us.
We will then use the golden eggs to buy a geese farm with many geese producing more golden eggs.
And with those golden eggs we will buy multiple geese farms that will produce golden eggs by the hundreds and thousands.
I think you get the message. NEVER KILL THE GOOSE THAT LAYS THE GOLDEN EGG.
You don’t sell your asset you RETAIN your asset
Then you go to the second step which is you REFINANCE.
- REFINANCE- the equity within the asset
By strategically Unlocking the equity by means of a second bond and getting Your financing strategist to advise you on the steps is a wise move.
Using software to do an analysis is vital to make provision for cash reserves.
And my GENERAL Rule of refinancing is to refinance when you are at break-even point and to avoid paying tax.
If your property breaks even every month, its great news, but if it makes a profit, tax will be paid.
So to prevent paying tax, you refinance to eliminate profit and you eliminate tax simultaneously.
Your GOAL should be to build your property portfolio tax-free until retirement.
Rental income(profit) that you would have paid tax on is now strategically used to repay extra debt.
The third R is to
- REINVEST – Roll over the equity to buy more assets.( the simple definition of equity is your market value less your outstanding bond)
Now that you have calculated exactly how much refinanced money you will need for the existing property, You are ready to REINVEST and roll the equity over into the DEPOSIT, SHORTFALLS, ACQUISITION COSTS of the next properties you buy.
One property can literally buy multiple properties depending on the value of money you have refinanced.
So the question is :
Who’s is paying for my property?
With proper proof of your income and disposable income and of course your financing strategist( investment bond originator ) you will be using OTP money, time, effort and experience to build your multi-million rand asset base.
You will strategically Leverage
The BANKS MONEY TO BUY THE property.
You will leverage the Tenant to pay the bank (the mortgage).
You will leverage the equity in your current property to reinvest and roll-over towards the deposits of your next investment.
You will leverage your bond originator and tax accounts experience and time to take you through these strategic steps to ensure you create the correct cash flow provisions and tax efficiency.
The secret to building your multi-million rand property portfolio is
RETAIN, REFINANCE AND REINVEST
You can do this.
So go out there invest strategically invest intelligently become financially free and leave a legacy.
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