Buy to let is a simple investment but do your homework first and reap the rewards

WHEN it comes to investing in property in order to build up a rental portfolio, many people opt for sectional title or home owners association- run complexes because they tend to be more secure and popular with tenants than free-standing homes.

Michael Bauer, general manager of property management company IHFM, says this is usually a good move. However, before buying, investors need to thoroughly investigate the financial soundness and good management of the complex, through a managing agent or the trustees).

“Most South Africans don’t have large sums of cash to invest, and banks won’t lend money to buy shares, so property invest- ment seems a good option for building up capital without having to invest large amounts of your own money,” says Bauer.

“If you have a solid credit record and the bank finds value in the property to be bought, many banks will offer 90 to 100 percent bonds, providing an excellent way to own an investment with minimal initial outlay.”

He says when approaching investing in property for the first time, it’s prudent to spend at least six to 12 months looking and investigating the areas p r o p e rl y. Complexes a nd estates tend to be popular with tenants because they don’t have to look after the exterior of the building or pay extra for the upkeep of amenities such as swimming pools, gyms and clubhouses. And as long as the scheme’s finances are well managed and the body corporate runs smoothly, the owner should have a stable investment to rent out.

In addition to the cost effectiveness of living in a complex, security has become more important.

“The TPN report for the fourth quarter of last year shows tenants in the R3 000 to R12 000 categories have the best track records in paying on time and being in good standing with their accounts, with most tenants looking for homes to let between R3 000 to R7 000.

“Buying a unit that will bring in this amount of rent each month will place you on a good footing, as this is where the market is most secure and where the demand is high,” says Bauer.

“You need to use common sense in choosing a property, so it should be close to amenities, schools, public transport, have easy access to main routes, as you would when looking for a home to live in yourself. This will also help you find good tenants and keep them. Once a good long-term tenant occupies your unit, the chances are you will be able to increase the rent each year without problems, and pay off the bond more quickly, so the property will become a good retirement nest egg later,” says Bauer.