Our Glencairn rental property is, because of it’s location, size and value, targeted at a certain demographic (by default I guess); typically that of the single mother or lower middle-class income earner. As a result, over the two-and-a-bit years we’ve owned and let the house, we’ve seen many cases of people living pay-check-to-pay-check, unable to pay the rent as soon as their employers make a late payment or they loose their jobs.
Not nice. Not for them and not for us as landlords!
These cases often have me pondering our own situation, our liquidity and our own ability to survive a job loss or a temporary loss of salary. (The issue that clouds my thinking sometimes is the bond debt.)
So, we’re not in the same situation by any means but if we were to max out the bond (I. E. Take the full R1.6M allowed) Then we would have zero means of getting ready cash in an emergency. All our reserves are tied up in assets and investments that, while they can be sold or borrowed against should the need arise, would all take a while to liquidate and would all most certainly take a knock in value with a depressed market and economy. That is, I believe, my greatest concern with the way we are funding UCT this year – we’re greatly diminishing that “buffer”.
A worst case scenario for us in the present moment would be a retrenchment; with UCT fees to pay and no desire to find another corporate Plato’s Cave. Such an event would have us scrambling to see which options suited. There would be three avenues of investigation:
1. Could we sell 253 for a decent price (akaR2.5M)?
* This would kill the debt and leave us with R1M to R1.5M which would buy a little time but would quickly run out at current burn rates.
2. Could we rent out 253 while living in the cottage?
* The cottage isn’t yet habitable; we need some spend here still but we could live and build while income comes in from the main house.
* The hope is that this option would bring in R20k pm between 253 and 16deV (but it comes with risk and headaches as we’ve seen this month in Glencairn )
3. We could cash in unit trusts (R177k) and SESA shares (R35k?)
* Not ideal right now since the market is in something of a free fall (OM UTs lost about R10k in value already)
* The plus here is these are quick and easy to cash and could buy us time.
So these are our only real options (there may be others but right now I can’t think of any). Damelin is paid for all of 2016. UCT is paid up until mid-year, so as of Feb we’d have 4 to 5 months to make a plan or go back to work. If it did happen we would immediately need to rachet down our current burn ( eg putting Frank on notice, cutting travel costs, really shopping carefully, selling the cars, changing the medical aid options, etc. There’s not much space to cut but there are definitely possibilities). As an ultra extreme measure we could pause the PPS RA’S again but that would be last resort.
Bottom line is there is no way we can carry on at our current burn rate. We would have to make some hard decisions if we wished to do that – either more corporate slavery (if indeed that is even possible in sunny SA at present) or lifestyle killers (bye bye Glencairn).
It wouldn’t be pleasant but we could survive it…..I think (at least way better than our tenants).
We’re not quite comfortable with the stash but at least there is a workable plan. Need to keep the expenses low as possible and keep building the stash and the rental options.
We have no choice because I have this gut feel that the scenarios discussed above are way closer than we may like to think!