Tips for property investing

Tips for property investing
Tips for property investing. Image source: Pixabay

If you are aware of all the risks and costs involved in buying a Property Investment in South Africa, it can be a smart decision.

A rental property can be a great way to generate additional income, but you should still carefully evaluate a location that has long-term potential.

The current economic climate is characterised by low growth rates and high inflation. There are also high levels of volatility in financial markets and dwindling consumer trust.

First, higher interest rates mean higher monthly payments on your bond. This has an effect on how much rent you charge and how affordable your rental property is for tenants.

A second reason is that it’s more difficult to purchase property due to an increase in interest rates. This means that more people are forced to rent because they can’t get a loan from the banks.

This is a great opportunity to become a landlord. Let’s take a look at what you need to consider before you make an offer on your first property.

Types of property and location

Pinpoint depreciating and appreciating areas. The value of property can be affected by factors such as rezoning districts or crime statistics.

Middle-class tenants are attracted to properties close to services, schools, and centres. You might have to lower your rental price to be able to compete with other properties in the same area, however, if there are too many vacant areas or mass development.

Recognize all costs

You will need to have a deposit to secure a bond if you are unable to pay upfront cash for the property. This amount, usually 10% of the property’s cost, can be obtained from savings or friends.

Additional costs include registration and bond fees as well as transfer costs if the property was previously owned by another person. This amount can be used to pay for legal fees during the sale if you have saved substantial funds but not enough for the deposit.

Levies will apply to property with a sectional title.

You should also consider the following:

Rates and taxes

Water and electricity

Maintaining your residence

Property damage repair

You may not make a profit immediately. Be prepared to pay some of these expenses for the first few year to supplement your rental income.

Property investing has many benefits

Wealth can be built without having to make a large upfront investment. Your home loan can be used to finance your purchase and you only have to pay a small percentage.

Banks view a tenant as an additional income source and will allow you to build a portfolio of properties over time. The bank can help you acquire future properties for a lower deposit amount if you have a good relationship.

Property investment can appreciate over time. What you initially paid for your estate could double in value when it’s sold. Annual rental increases are also a good idea due to property appreciation.

There are risks to be aware of when renting investment property

Non-paying tenants are protected by legislation. It’s not possible to vacate your property if you can’t pay your rent.

Bad weather or general wear and tear can increase maintenance and upkeep costs.

An emergency fund should be set aside to cover the months when your property is unoccupied due to low occupancy, repairs/renovations or any other reason.

Hire a property agent

The managing agent acts as a liaison between the tenant and you. He/she reduces administrative tasks such as background checks, regular inspections of the property, and the creation of contracts.