Investing in a buy-to-let property is an attractive opportunity. But as with any investment, it needs to be carefully considered and understood before making the commitment. In Gauteng alone, TPN credit bureau’s market strength indicator for rental properties shows that rental demand has recently matched supply at 50%. While this shouldn’t be a deterrent for those interested in buying property to let, it does mean that certain factors must be considered before diving in.
Location matters
Different areas experience different levels of house price growth. The price of properties in Vereeniging in Gauteng, aren’t going to increase or decrease at the same rate as the price of properties on the Atlantic Seaboard in the Western Cape for example, which currently has a much higher growth rate. You need to investigate areas in which property prices are increasing as well as areas that have a demand for rental property.
Calculate your potential income
Calculations are important in your decision. From purchasing costs, all the way to ongoing maintenance costs, everything needs to be calculated in order to ascertain whether or not the property will bring in a profit for you. A number of costs must be considered including, transfer fees, bond repayments, potential maintenance fees, management fees if an agent controls the rental process for you, rental payments, levies and rates.
Consider your tenants
Considering who you wish to rent to, will help you find the right property. Do you want to find a property close to tertiary institutions and let to students? Or would you prefer to let to a young couple or family? If you want to let to students, you will want to consider a small, basic property that is easy to clean, lock up and go. If you want to let an older demographic such as a young couple or family, you’ll want to look for a slightly bigger property, possibly with a garden and has security facilities available. Considering who you want to let to will help you purchase the right property for your and their needs.
While there are a number of other factors to consider, these are some of the most important areas to do your homework in before buying a property to rent.
