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Ensure your investment property suits your ultimate goal

Undisputedly, and as an investment, residential property offers the potential for very sound returns – both in capital growth over the medium to longer term and in rental income.
 
However, says Louise Varga, Pam Golding Properties area manager in Stellenbosch, first of all, you need consider your ultimate objective for investing in property. “Are you seeking a property for pure investment, or do you have a long-term goal in mind such as acquiring a home where you can retire to in the future?
 
“It’s a useful exercise to compare two totally different markets such as Stellenbosch and Strand, located in close proximity but catering for different requirements.
 
“If your end goal is to buy a property to live in when you retire, then the coastal town of Strand would be far better suited to your lifestyle.  But if our aim is to build up a property portfolio, then rather buy in Stellenbosch as the rental market will always be strong.”
 
Supply and demand

Varga says it’s a global phenomenon that residential properties in student towns achieve a higher capital growth compared to the national average. So if you are acquiring a property to retain for several years and then exit the investment, Stellenbosch is recommended as each year parents of students are looking to buy. 


View of Bergzicht Plaza in Stellenbosch where a two bedroom apartment recently sold for R1.8 million.

 
Alternatively, you may choose to hold onto your investment property in Stellenbosch for a longer period for excellent capital growth. For example, if you purchased in Bergzight Plaza – close to campus – in 2002 you would have paid R398 000 for a two bedroom apartment, which recently sold for R1.8 million. Today the rental income on this unit is R9 000 per month.
 
“Being a university town with a high demand for student accommodation, Stellenbosch is quite possibly the safest market to be in from a buy-to-let point of view. Every year there are students leaving and more new students entering who need accommodation in close proximity to campus.
 
“The cost of acquiring a typical two bedroom, one bathroom apartment on campus would set you back on average R2 million - with rental income of R12 500, while an apartment about 500 metres off campus would fetch R1.5 million and generate rental of R8 000 per month. Somewhat further, say one kilometre away, a two bedroom apartment would start at R750 000 and achieve a rental of R6 000 per month, but bear in mind the further away the property is from campus the lower your capital growth.”
 
Generally, these apartments vary in size from 48 to 66sqm, some modern and others old but with modernised interiors as the landlords aim to achieve the maximum rental. Units are let unfurnished and often repainted and maintained before re-letting.
 
Varga says one of the most critical factors in Stellenbosch and for buy-to-let student accommodation is parking. Having basement parking not only increases the price but also the rental; should a unit not include parking it becomes very difficult to sell or rent even if it is on campus.


Sweeping view across the beach and ocean from Grasso apartment building in Strand.

“If you are looking at a property to retire to, then Beach Road in Strand, with sweeping views across the ocean, is where you should buy. Here a two bedroom unit between 90 and 120sqm with security, parking and lift and situated close to amenities is ideally suited for a retirement property in this locale which enjoys slow but steady capital growth.
 
“Currently, a 95sqm, two bedroom apartment in Grasso apartment building would go for R1.5 million. This could be used for your weekend or leisure getaway property and rented out as holiday accommodation during other vacation periods when you can earn on average a daily tariff of R1 000. Long-term rentals are, however, more secure and higher in demand, generating income of about R6 500 per month.”
 
Good quality, modern apartments or older units are available, with many of the older blocks being upgraded. It’s advisable to ensure that a professional managing company is managing the finances, upkeep and maintenance of the building.
 
Adds Varga: “The two areas of Stellenbosch and Strand differ considerably in terms of cost per square metre, so tailor your investment to suit your budget. In Bergzicht Plaza in Stellenbosch a 55sqm, two bedroom apartment recently sold for R1.8 million, or R32 700 per square metre. In Grasso in Strand a 95sqm two bedroom apartment sold for R1.53 million or the equivalent of R16 000 per square metre. In the latter property municipal rates are R350 per month and the levy R900 a month while in the former the rates are R435 and the levy R1 500 per month.”


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