select
|

Maximise your rental property’s potential

Are you in the market for a rental investment property? If so, then it is imperative to take your time and do the necessary research to ensure that the property you buy suits your needs perfectly. A reputable, experienced estate agent can be of valuable assistance in this regard, says Adrian Goslett, CEO of RE/MAX of Southern Africa, who notes that it is vital to gather as much information as possible from reliable sources before venturing into the rental property market.
 
“The adage that ignorance is bliss may apply to certain aspects of life; however property investment is certainly not one of them.  As a tangible asset, a rental property should appreciate in value over time. While this is not always guaranteed, there are certain factors that investors should consider to assist them in maximising their rental property’s potential investment returns,” says Goslett.
 
There is power in positioning

A property’s position or location will have a massive impact on its potential appreciation value. “The most important aspect to consider in any property purchase is the property’s location and secondly the type of property it is. Not only will the area in which a property is located affect its investment growth, it will also have an impact on the rental income that the property will be able to generate,” explains Goslett. “Generally a property located in neighbourhood that is close to good schools and shopping centres will fetch a high rental income than those that are not.”
 
Goslett adds that buyers also need to take into consideration the rental demand for certain types of property in certain areas. “There is no point in purchasing a freestanding house to use as a buy-to-let property when the demand for rental properties in that area is for sectional title apartments, for example.”
 
Goslett adds that if an investor is unsure of a neighbourhood or development, they should speak to the tenants and owners that are currently living and renting there. This can assist in providing valuable information with regard to the area, amenities and other facts that could be useful. 
 
Weighing up the costs

“It is recommended that before determining a rental price for the property, an investor should research the average rental paid by tenants in the area. This will be a good way to estimate the potential rental income that the property will provide on a monthly basis and weigh up whether or not it would be a good investment option,” advises Goslett.
 
He notes that the initial decisions made in the first stages of purchasing a rental property will largely influence that property’s  potential. The bond repayments will not be the only expense, meaning that a buyer will also need to consider aspects such as renovations that are required, as well as the maintenance and levies of the property in order to discern an investment’s viability. This should be taken into account before the property is purchased,” says Goslett.
 
Sellers are required to list the known defects of the property, which will allow the investor to determine the possible initial outlay of purchasing the property and undertaking the necessary upgrades and repairing defects. This will help in assessing costs and weighing up the investment’s potential income after expenses. Goslett advises that if there are aspects that require further attention or anything that the investor is not sure of, they should consult with a qualified and reputable home inspector to avoid unforeseen costs.

Managing the property

When investing in a rental property it is important to decide who will manage the property. “Either the owner of the property can decide to manage the property themselves, which at times could be rather laborious or they can make use of a rental management agent. If the decision is to manage the property without professional assistance, it is important for the investor to relate to the property as a business venture and manage it accordingly. This would include keeping track of all expenses as well as the income generated,” says Goslett.
 
He notes that in the case where an owner decides to employ a management agency, all matters relating to the property would be handled by them for a percentage of the rental income or as per the agreement. A part of their service would include vetting all prospective tenants through their various methods and credit checks, along with collecting monthly rentals.
 
Legislation

According to Goslett, a vital aspect when considering purchasing a rental property is researching the laws that apply to rental agreements and the responsibility that falls onto a landlord. “Legislative changes that have come into play such as the Credit Amnesty Act, along with the proposed amendment to the Rental Housing Bill could bring about some significant changes in the rental market for both tenants and landlords,” says Goslett. “For example, a major change that the bill proposes is that all lease agreements be reduced to writing. The onus of this will fall onto the landlord, who must ensure that a written agreement is drawn up. The written agreement will be a binding, legal document that would be enforceable in a housing tribunal or a court of law.”
 
He notes that landlords will have to ensure that their lease agreements are legal and that they adhere to all the legislative stipulations. Lease agreements must be in line with the Consumer Protection Act and have terms that are clear, understandable and that protect both parties in the event of a dispute.
 
Insurance and contingency

Once an investor has purchased a rental property, they will need insurance to cover their liability, which can be done by speaking to a broker who will advise on the correct insurance needed for the type of rental property.  This will prevent the landlord from having to find additional money to cover unexpected contingencies such as a burst geyser. Landlords should also remember that certain liabilities will not be covered by insurance, so it is advisable to have an emergency fund to cover these circumstances.
 
“Purchasing a rental property and becoming a landlord is not for everyone, however, it can be an exciting and interesting way to build wealth and start seeing returns on your property investments,” Goslett concludes.


  Comment on this Article

  Please login to post comments

Post to my facebook wall
  
2000
Characters remaining


    Latest Property News
    • 19 Feb 2018
      Possibly one of the biggest sources of contention between landlords and tenants surrounds the rental deposit. “Most tenants rely on getting their rental deposits back when moving, so that they can use it to pay a deposit on their new home. Having it withheld or even having large amounts deducted can lead to a lot of distress,” explains Bruce Swain, CEO of Leapfrog Property Group.
    • 19 Feb 2018
      Situated approximately halfway between Johannesburg and Pretoria, Midrand was established in 1981 and forms part of the City of Johannesburg Metropolitan Municipality. It has become one of the major business hubs in the country with major pharmaceutical, textile, telecommunication and motoring giants situated within its boundaries.
    • 19 Feb 2018
      The PayProp Rental Index Annual Review of 2017 shows that the rental market suffered from much volatility during the year. It kicked off with rental growth spiking in January with weighted year-on-year growth (YoY) growth peaking at 8.3% before dropping to 6.34% in July, dipping down to less than 5% in November and then experiencing a slight uptick at 5.75% in December.
    • 19 Feb 2018
      While most homes in cluster complexes, estates and other gated communities come with at least one garage or carport, residents would often like additional permanent parking or storage areas for things like trailers, bikes, boats and caravans.
    • 16 Feb 2018
      Whether you own a property in a sectional title complex or are looking to invest in one, the financial standing of the body corporate is the single most important thing that can affect your investment or your buying decision.
    • 15 Feb 2018
      One positive consequence of the financial crash in 2008 was the rise in consumerism, especially in the property market, where buyers have steadily become more knowledgeable and more value conscious.
    • 15 Feb 2018
      While most homeowners will take the agent’s commission into consideration when they are trying to determine what the will get out from the sale of their property, many often forget to factor in the other costs involved in a home sale, says Adrian Goslett, Regional Director and CEO of RE/MAX of Southern Africa.
    • 14 Feb 2018
      The forecast for the national rental market in 2018 remains a mixed bag of good news and bad news. Although rentals are expected to rise slowly as the challenges of home affordability and tighter lending criteria tighten their grip, it’s a double-edged sword as the market also will come under increasing pressure from factors like declining disposable income levels.
        
    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