It is a countrywide phenomena that rental properties are becoming increasingly more expensive for tenants. This situation could result in tenants deciding rather to become proud owners of possibly their first property and for property investors to increase their property portfolios, as in some areas it is becoming cheaper to own than to rent.
For a buyer, surely the most exciting time in their hunt for the ideal property is when they find a home that appeals to them, suits their budget and then to decide whether it is an investment buy-to-let property or whether they will live in it themselves. This decision will be based on their personal situation and circumstances.
Buy-to-let is always a great investment. If the property you identify already has a tenant, be careful to establish what their paying habits are like, if they have looked after the property, are they difficult etc. This could influence the success of your buy-to-let plans. “It may be unfair, but tenants generally have a reputation for not keeping homes in the best condition and thus, buy-to-let investors who might be interested in adding the property, to their portfolio often prefer to find their own tenants” says Shaun Rademeyer, CEO of BetterBond.
“When you decide on a buy-to-let property, you need to bear in mind what will appeal to your prospective tenants, such as the targeted age group, security, location to schools, hospitals, shopping malls, colleges, etc. These factors will definitely affect the type of tenant you can get, the rental income you can demand, which will underpin a good and solid investment” says Craig Hutchison, CEO of Engel & Völkers Southern Africa.
“The reason for the shortage of rental properties, and thereby the increase in rentals, is due to many factors, but possibly more so that prospective buyers may feel they are not financially qualified to buy and so therefore rather rent. To establish to what value you are eligible to buy for, our own internal EV financial team are highly competent and experienced to provide you with an accurate analysis of the purchasing bracket you will qualify for” Craig continued.
It is the ideal time to buy now rather than to rent, as according to John Loos, Household and Property Sector Strategist at FNB – “The March FNB House Price Index continues to reflect a solid and well-balanced residential property market, rising year-on-year by 8.6%.” He further added that the average house price for March 2014 rose 8,6%.
You may find that your monthly mortgage loan account is going to be less than the rentals. With the relatively low bond interest rates currently being offered, this is the ideal time to invest in property as the increase in the value of your property is apparent. The demand for rental properties is not abating and a purchaser of a buy-to-let property is pretty much guaranteed of covering the bond plus additional rent, which can be ploughed back into the home loan. The other option is, if you are planning to upgrade to a larger home, is perhaps to consider renting out your current property and buying an additional property for your own use.
From PayProp, a software programme used to manage rentals, it is shown that in 2013 residential rentals rose by an average of 10,8%. This would appear to be the trend and is noticeable in 2014 rentals. If you want to make an investment while earning a second source of income, then buying property to rent out is a good option.
Recently, Human Settlements Minister Connie September introduced the Rental Housing Amendment Bill in the National Assembly. The legislation outlines the rights and responsibilities of both landlords and tenants. It is good to familiarise yourself with laws that are relevant to you, as there could quite often be confusion between the landlord and the tenant about who is responsible for what.
If you are considering the buy-to-let route, then you must ensure you have a good understanding with the tenants. Have everything in writing and do not depend on a handshake agreement. Both parties need to enter into a legal, written agreement. This is to protect both of you.
Consider all aspects of the property you are renting and living in, and keep a realistic view of whether you do indeed want to own it one day. Do this before you spend any time or effort in upgrading the property at your financial loss.