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And his team are re­spon­si­ble for all residential-prop­erty lend­ing. Here is his ad­vice on how to build your prop­erty port­fo­lio

CityPress - - Careers - The costs and your obli­ga­tions

nvest­ing in rental prop­erty is a great op­tion. Your re­turn is twofold – cap­i­tal ap­pre­ci­a­tion of your in­vest­ment (value of your prop­erty) and the monthly rental in­come.

The prop­erty will even­tu­ally pay it­self off as rental-in­come ap­pre­ci­a­tion will help with your bond re­pay­ments. Once the prop­erty is paid off, this rental in­come be­comes an ad­di­tional cash flow.

Your rental in­come will de­pend on a num­ber of fac­tors. These in­clude lo­ca­tion, de­mand ver­sus sup­ply, gen­eral main­te­nance, and the look and feel of your prop­erty (mod­ern ver­sus dated).

When talk­ing rental port­fo­lios as an in­vest­ment, you will need to con­sider the fol­low­ing:

In whose name will the prop­erty be reg­is­tered – your per­sonal name, your fam­ily trust or a prop­erty hold­ing com­pany?

In whose name will the loan/debt be taken out?

It is im­por­tant to know this for tax pur­poses and for es­tate plan­ning.

The costs as­so­ci­ated with rental­prop­erty port­fo­lios must also be con­sid­ered. This will in­cor­po­rate all the costs of buy­ing a prop­erty:

Bond costs – at­tor­neys’ fees and bank ini­ti­a­tion fees.

Trans­fer duty (tax paid on the prop­erty to the SA Rev­enue Ser­vice).

On­go­ing costs like sec­tional-ti­tle levies, rates and taxes, in­sur­ance.

Main­te­nance and up­keep of the prop­erty.

Another im­por­tant fac­tor to con­sider is whether you want to place the ten­ants your­self and man­age the rental in­come and ten­ant li­ai­son, or if you want to use rental agen­cies to do this for you at a cost. If you do this your­self, you will need to:

Find your own ten­ant and do back­ground checks your­self, and draft your own rental agree­ment/lease. Col­lect your monthly rental. Man­age any ten­ant is­sues around prop­erty main­te­nance like plumb­ing and elec­tri­cal prob­lems.

In a worst-case sce­nario, you will need to man­age all le­gal­i­ties and evic­tions.

The ad­van­tage of do­ing this is that you al­ways know what is hap­pen­ing with your prop­erty and you can man­age your costs ef­fec­tively. If you use an agent, the agency will do the fol­low­ing:

Place a ten­ant and do the back­ground checks, and make sure that a signed rental agree­ment/lease is in place.

They will col­lect your rental and pay this to you net of any costs.

They will man­age ten­ant is­sues like plumb­ing and elec­tric­ity.

They will man­age any evic­tions in the worst-case sce­nario.

How­ever, the lat­ter will come at a cost to you. This will in­clude: A once-off place­ment fee. Monthly man­age­ment fees, which are about 8% to 10% of your rental in­come.

If struc­tured cor­rectly, agent’s fees may be taxd­e­ductible.

Do note that your obli­ga­tions as a prop­erty owner do not dis­ap­pear once a ten­ant has been placed. You will still be li­able for pay­ing all your monthly re­pay­ments to the bank and any of the costs men­tioned above.

PHOTO: LUCKY NXUMALO

Praven Sub­bra­money EX­TRA IN­COME Residential prop­er­ties within the vast Steyn City mixed-use de­vel­op­ment in the north of Johannesburg.In terms of land sur­face area,Steyn City which is ap­prox­i­mately six times the size of the Sand­ton city cen­tre,is the largest sin­gle residential de­vel­op­ment ever un­der­taken in South Africa.

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