Rent or buy, err on the side of caution
Samuel Seeff
Ready for your first rental or property purchase? While exciting, it comes with considerable financial implications and obligations.
Renting
You’ll need to be financially able to afford the rental as it usually comes with a fixed-term rental contract with financial consequences in the event of non-payment.
You’ll need a clear credit record and three months’ banks statements which show sufficient money paid in to cover the monthly rental.
Generally, your monthly earnings need to be around three times the monthly rental. A secure job is usually a prerequisite if the rental’s in your own name.
Next, ensure you have enough funds to cover the rental deposit, which could be up to two times the monthly rental plus any additional administrative costs charged for the credit clearance and drawing up the lease.
You’d sign a lease agreement for the rental period. This document sets out all the rights and obligations of both parties, new renters must pay careful attention to any special provision such as those that may apply to your conduct in a sectional title property.
Before taking occupation, ensure a thorough incoming inspection is done together with the rental agent or landlord and this is in writing and attached to the lease agreement. The lease is a legal document and you’re bound to fulfil the contract to its conclusion.
This means paying your monthly rent in full, looking after the property and maintaining it in the condition that you received it, and conducting yourself in an orderly manner throughout your tenure. If in a sectional title property, get a copy of the Scheme Conduct Rules and keep to them.
Purchasing
The point of departure will be affordability and this will be a factor of your income. You’d need to earn enough to cover the monthly bond amount by a factor of at least three times.
Again, a stable monthly income needs to be proven via three months’ bank statements. Banks may have additional requirements.
Next, have enough cash available should you need to pay a deposit towards the purchase price. Additionally, there’ll be transaction costs payable if the property price is above R900 000 as well as attorneys’ and bond registration fees.
You may need to budget for upgrades and enhancements. Additionally, you’ll need to pay deposits for basic service connections.
Samuel Seeff is chair of Seeff Property Group