Investment: look before you leap
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.