select
|

Consider these tips before buying an investment property

Buying an investment home is a big expense and commitment, so you need to make sure you know as much about the property and the local market as possible before taking such a big step, says Justin Easthorpe, ooba regional sales manager.

He has the following tips for would-be landlords:

Understand exactly what you are buying the property for, as this will affect the decisions you make. You need to be sure you’ll be able to rent it out and that there is good price growth in the area. When buying for investment purposes, it’s important to separate your personal tastes from those that will make the property attractive to tenants or future buyers. Location is important as your return on investment will depend on the demand for the property.

Whether you can afford an investment property will be scrutinised by the banks. They will almost certainly require a significant deposit and will closely examine your income and expenses to be sure you can afford the monthly bond repayments.

Most banks are also unlikely to take potential rental income into account when considering bond applications, because they need to be confident that you can afford the property, whether or not it is rented out. The calculators at www.ooba.co.za/calculators will help you work out your budget for buying an investment property.

You will need to consider the costs of refurbishment, maintenance, rates, taxes, electricity and water, as well as any levies if the property is a sectional title unit. You will also need to research the costs of insurance and security.

Another important consideration is furniture if you will be letting it furnished, and you should assess the condition of the equipment and furnishings to determine what you’ll need to replace and how soon. Banks don’t provide bonds for furniture that is itemised and sold separately, so you will have to pay separately for this.

Other additional expenses include transfer duties and legal fees, so include this in your overall return on investment estimate.

As with any property, you need to check the building and the roof for structural damage. Look for damp or weak areas, and poor finishes that will need replacing.

The seller must provide an electrical compliance certificate, and, in certain municipalities, a gas compliance certificate, a plumbing certificate and a beetle-free certificate. The beetle-free certificate can usually be waived by agreement between both parties.

Speak to more than one estate agent in the area to find out about local property price growth and rental rates. Find out how many months of the year you can expect occupancy – considering as well that you might like to use the property during rental high season.

If you are buying a unit in a holiday rental block, you can ask the estate agent for the holiday occupancy rate from the last year, to assess whether you will be able to make a sizeable return on your new property.

“You can also assess the going rental rates by searching for similar properties in the area online,” says Easthorpe.

“By informing yourself carefully about every aspect of your purchase, you can set yourself up for a good rental return from your investment property,” he says.


  Comment on this Article

  Please login to post comments

Post to my facebook wall
  
2000
Characters remaining


    Latest Property News
    • 22 Jun 2018
      The rental market in many Johannesburg suburbs has shown encouraging signs of revival this year but it remains a competitive market and landlords who best cater to their market’s needs will reap the healthiest returns.
    • 22 Jun 2018
      Home design is constantly evolving to reflect the changing needs of society. We look at some of the ways in which our use of space is changing.
    • 22 Jun 2018
      While estate agents can help the seller with correctly pricing the property and marketing a property to the right pool of potential buyers, at the end of the day it’s the impression that the property will make on buyers that counts the most.
    • 21 Jun 2018
      Anyone who’s ever been involved in a building project that’s gone wrong will appreciate the importance of adequate insurance cover in the construction industry.
    • 21 Jun 2018
      A recent news story about a blind tenant caught in a legal battle with his body corporate over letters and notices he was unable to read and consequently comply with has raised the question: what are the legal obligations for landlords with disabled tenants?
    • 21 Jun 2018
      A trend that’s taken the world by storm in recent years is that of hygge (pronounced: hue-guh), a Danish concept that is about creating intimacy, connecting with loved ones and taking pleasure in small, ordinary things.
    • 20 Jun 2018
      Buying or selling real estate isn’t as easy as it is portrayed sometimes, especially if there is a death of a party during the transaction which can make it awkward, tricky and inconvenient.
    • 20 Jun 2018
      With interest rates remaining at historic lows and banks continuing to compete for mortgage finance business, first-time buyers with funds at their disposal are currently well-placed to gain that initial foothold on the property ladder, particularly in the light of the slightly lower growth rates currently experienced in residential property values.
        
    X
    Subscribe to the MyProperty Newsletter

    Name  
    Last Name  
    Email Address  
    Email Frequency
    select
    X
    Share this Page

       
    For Sale Property
    Rental Property
    More Options
    About
    Connect with us
    FEEDBACK