Are you ready to be a landlord?
Buying an investment property is a dream for many and can be a great financial move, but it also comes with a lot of responsibility.
Buying an investment property is a dream for many and can be a great financial move, but it also comes with a lot of responsibility. RE/MAX have put together a list of important points to consider to help you make the decision:
- How much free time do you have?
Renting out a property can become highly time consuming, as you need to deal with the following:
- Find reliable tenants
- Prepare the property for the tenants
- Deal with ongoing maintenances hassles and tenant challenges
Those with less time available should factor in the cost of involving a real estate professional to help manage the rental on your behalf.
- How much debt do you have?
If your tenant ever happens to default on payments, you do not want to be in a position where you will be unable to make the necessary repayments on your debts. Purchasing a rental property may not be the right move if it will overstretch any other financial commitments such as outstanding student loans, unpaid medical bills, or even children on their way to university.
- Have you thought about financing the purchase?
Getting the lowest possible interest rate on your home loan is a crucial part of maximising the return on a buy-to-let investment. When applying for finance, keep in mind that most banks do not take the potential rental income on the property into account when assessing your bond application.
- Have you factored in all the costs?
Once you learn how much you can charge in rental income for the property, you still need to think about what your expenses will be and subtract them from the income to find out what your bottom line will be. These are some of the standard fees you need to include:
- Insurance
- Levies and/or Homeowners Association fees
- Utilities
- Advertising costs for acquiring new tenants
- Travel expenses to and from the property
- Cleaning, maintenance and repairs
- Professional contracts (legal and management)
- Home loan repayments
- Rates & Taxes
- Have you considered the location?
Ambitious millennials are often looking for a cosmopolitan lifestyle, usually near urban vibes. There’s also a drive for family homes in suburban rental markets across Johannesburg, Pretoria, Durban, and Cape Town too. Semigration trends have also created a demand for rentals in coastal and smaller towns. Investors should also consider “work, play, live” opportunities near transport nodes that reduce travel time and are situated in fully-equipped lifestyle estates. In general, South African renters are seeking a better quality of life, greater safety, and a sense of community.
