Transport and and convenient amenities vital considerations for buy-to-let investors

It is that time of year when parents start the mad scramble to secure accommodation for their children for the new year when they start their tertiary studies. 

It is widely acknowledged that there is a shortage of student housing, but before investing in buy-to-let property to cater for this sector of the market, be sure that it ticks all the right boxes of prerequisites for a good investment. That is the word from Seeff's agents in two of the city's tertiary educational catchment areas, the Southern Suburbs and city centre.

A good local transport network and convenient access, preferably within walking distance, to amenities such as shops for necessities, a gymnasium and of course nightlife is important. A location within walking distance of a university or FET college would be first prize, but a bus or rail network or the Jammie Shuttle in the case of the Southern Suburbs, is ideal according to sectional title agents, Sean Guy and Belinda Keys.

The shuttle that that runs to and from UCT (University of Cape Town) through to Rondebosch, Newlands and Claremont is for example a vital driver for the demand in student housing in the area. Given that there is always a shortage of suitable apartments in the Southern Suburbs, extending the shuttle service to include Kenilworth would not only alleviate some of this, but would revitalise investor interest in that area and increase values, says Guy.

Rondebosch agents, Charmaine Scott-Wilson and Linda Knoop says the suburb is as is usual this time of year, seeing a surge in demand for student accommodation and, as always, there is a shortage of housing. Rondebosch is central to everything and therefore popular for student accommodation.

As a rough estimate, the UCT residences can for example only accommodate about 20-30% of the overall student need of in excess of 26,000 new enrolments each year. Add to this the Varsity College in Rondebosch and you are looking at significant number of students annually that require accommodation.

Parents generally want their children to be accommodated in a safe complex, preferably with secure parking. The ability to share accommodation and reduce costs is yet another plus factor and so two-bedroomed apartments tend to be most in demand, say the agents. Provided you invest in the right area and the right type of accommodation, there is no real downside apart from maintenance and tenant turnover.

In areas such as Newlands and Claremont, one-bedroomed apartments now command a monthly rental rate of around R7.000 while a two-bedroomed flat can fetch about R10.000 per month. In Rondebosch, apartments that are within walking distance of UCT, preferably with two bedrooms and in a complex with 24-hour security such as Rondebosch Oaks are especially popular.
Generally, one-bedroomed apartments in the suburb now rent out for between R4.000 and R6.000 per month while two-bedroomed units can go for up to R8.000 per month, says Scott-Wilson and Knoop. Another popular option is communal houses where room rental rates range between R3.500 and R4.500 per month. As a general guideline, buy-to-let investors can expect a gross yield of 5%-7% on average.

The central city feeds into a number of tertiary educational institutions and there is always a steady flow of tenants and buyers looking for apartments here according to agents, Warren Emett and Jason Paans. Aside from the obvious convenience of being within walking distance of just about every facility that students could want for including a vibrant nightlife, the introduction of the MyCiti bus route means that students can now get to the Waterfront and beaches of the Atlantic Seaboard with relative ease. The agents note further that there is now a significant gap in the market for more affordable accommodation in the city.

Here too, two-bedroomed and even three bedroomed units are most in demand. While rentals vary depending on the building, as a general guideline, rates now range between R6.000 and R10.000 per month for a one-bedroomed unit. Two-bedroomed apartments can be let out for between R8.000 and R14.000 per month. Gross rental yields here currently range between 5%-8%, says Emmett.

Some of the important considerations for prospective buy-to-let investors include ensuring that the particular complex is carefully managed in addition to of course managing the collection of monthly rentals and general management of the tenant, say the agents. Other than that, there is very little downside to investing in apartments in the city. Aside from student housing, there is strong demand for general residential accommodation in the city.

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