Buying an investment property
For a number of reasons, South Africa's real estate market is an attractive sector of our economy, and it offers a multitude of smart options for savvy investors. With properties in various parts of the country being readily available for under the R1 000 000 mark, and many South Africans not being in a financial position to buy their own home, investing in a second property to rent out is an extremely sound investment.
Remember the age-old real-estate saying of "location, location, location"? It's just as relevant as ever, and the first step in your property investment adventure is to talk to your local property experts to get an idea of which suburbs offer the best value for money for buyers, and the best return on investment for landlords. There is good news for those wishing to start out in the world of rent-to-buy investments: the rental market for properties under the R1-million mark is currently exceptionally strong in various parts of South Africa.
Another important factor to consider is the effect of the interest rate. If an increase in the current interest rate comes along, it means higher monthly bond payments to think about. On the bright side for a property investor, however, higher interest rates mean more prospective tenants, because it will be more difficult for those needing a new home to obtain home loans. This in turn leads to greater demand for rental properties.
It is also important to bear in mind that if an interest rate increase occurs while your tenant is six months into a one-year lease of your investment property, you will not be able to increase the rental amount until the end of the 12-month period. In the interim, you will need to cover the cost of the increase.
If you already own the property that you are living in, you are well aware of the costs involved with buying your own home. Over and above the monthly bond payments, there will be once-off bond and registration fees to pay, as well as transfer duties. Depending on your financial circumstances, the bank may require you to put down a deposit on your investment property as well. Once the property becomes yours, there are other monthly costs to be considered. If the property forms part of a sectional title scheme, there will be levies to be paid, as well as rates and municipal bills. Sectional title investors also need to remember the possibility of special levies which may crop up.
From an investment point of view, it is great to think about the months when rental income received from your tenant will cover the majority of the expenses associated with your investment. However, it's not so great when you think about months in which you may not have a tenant. This can happen for a number of reasons - a tenant could move out suddenly or default on his/her rental payments. If a tenant moves out, it may take time to find a new tenant. You will still be responsible for payment of all the bills associated with the property in months like this, so it's important to make sure that you have the resources to cover these costs if necessary.
Investing in property with the idea of renting it out is an extremely savvy way to build wealth. In the short term, the rental income that you receive will help you to pay off the bond, while in the long term you will end up being the proud owner of a valuable asset. As an added bonus, you don't have to do any of the hard work alone. The Jawitz team is on hand to help you every step of the way, from finding the right property to finding the right tenant.
Author: Jawitz Website