In­vest­ment: look be­fore you leap

Weekend Argus (Saturday Edition) - - PROPERTY -

SA­MUEL Se­eff, chair­man of the Se­eff Prop­erty Group, says not all prop­er­ties or ar­eas of­fer good rental in­vest­ments and so it is vi­tal that you do your home­work be­fore leap­ing into such a vast fi­nan­cial com­mit­ment.

Ex­pe­ri­ence has shown that there are a few golden rules to keep in mind:

Lo­ca­tion: this is vi­tal. Prop­er­ties in ar­eas with good schools, ameni­ties and con­ve­nient ac­cess to busi­ness and com­mer­cial nodes tend to be the most in de­mand, re­gard­less of the state of the econ­omy. Some­times ar­eas un­dergo an eco­nomic or de­vel­op­ment boom and this can lead to strong rental de­mand, boost­ing buy-to-let in­vest­ments. Bear in mind though, that once the boom comes to an end, the de­mand for rental prop­er­ties might also sub­side.

Af­ford­abil­ity: gen­er­ally the more af­ford­able prop­erty ranges tend to be most in de­mand, re­gard­less of the eco­nomic cy­cle. In gen­eral, any­thing in the R4 000 to R12 000 a month range is sought after. When it comes to hol­i­day ac­com­mo­da­tion, any­thing close to beaches or tourist at­trac­tions or with great views com­mands higher rates.

Prop­erty con­fig­u­ra­tions: to­gether with lo­ca­tion, security has become a vi­tal re­quire­ment for ten­ants. That means security com­plexes and se­cure neigh­bour­hoods tend to be most in de­mand. Don’t make a sen­ti­men­tal pur­chase. Rather, speak to a lo­cal area ex­pert to as­sess what kind of ac­com­mo­da­tion is most sought after and at what rental rates.

Hol­i­day ver­sus res­i­den­tial ver­sus stu­dent lets: each type of rental is unique. Stu­dent ac­com­mo­da­tion might be most pop­u­lar in two or three-bed­room con­fig­u­ra­tions be­cause it al­lows for shar­ing. The most pop­u­lar hol­i­day flats on the other hand might be one and two-bed­room units. For res­i­den­tial ren­tals, three-bed­room town­houses or stand- alone houses might be pop­u­lar in one area while two-bed­room flats might be pop­u­lar in another.

Sup­ply and de­mand: just be­cause an area has a busy rental mar­ket does not nec­es­sar­ily mean that it re­quires more rental stock, es­pe­cially un­der weaker mar­ket con­di­tions. It is im­por­tant to as­sess whether you are in­vest­ing in an area where there is a short­age of stock in real terms that is matched by an equally high de­mand. Be sure to check how sus­tain­able the de­mand will be in fu­ture.

Hold­ing costs: prop­erty is a costly in­vest­ment. In ad­di­tion to the ac­qui­si­tion costs, there are on­go­ing ex­penses such as the monthly util­i­ties and ser­vices as well as prop­erty tax, in­surances and maintenance and up­keep. Maintenance of rental prop­erty can be costly. Re­mem­ber, your ten­ants are un­likely to look after your prop­erty in the same way that you would.

Ten­ant man­age­ment: it is crit­i­cal to en­sure you have good ten­ants who will look after your prop­erty and pay their rent on time. Just one to three months with­out a ten­ant can quickly become costly to a land­lord. The laws around prop­erty and ten­ancy are com­plex and it can be oner­ous and ex­pen­sive should you need to evict ten­ants. Un­less you are in the busi­ness of prop­erty lets, it is best to work with a cred­i­ble rental agency who can en­sure your ten­ants are prop­erly vet­ted.

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