Buy-to-let properties can be a great investment, but it is prudent to be aware of potential pitfalls before buying a home.
Renting your property can be a lucrative form of income, and it has long been advised that people “invest” in property. When it comes to purchasing a property to let, you should be vigilant of any defects or future financial drains that can arise as a result of time and tenancy.
Do your homework
Before you view properties, be sure to investigate which areas are safe, central, and close to attractive amenities such as malls, hospitals, schools, and restaurants. All being a huge factor for renters.
Next, think about the ongoing developments in an area. If they plan to construct a mall, this may increase the value of your property. If the build a taxi rank, this may increase traffic and put tenants off.
Do an assessment of the rental prices in areas you are considering. Compare this to what your bond repayment may be, and calculate whether the purchase will return a reasonable rental yield.
Things to be aware of
When you view a property, it is wise to make as many observations and notes as possible. Items to look out for can include:
- Signs of damp or mold – this can spread if not treated, and indicates that there might be a ventilation problem in the room.
- Poor water flow – do not be ashamed to open taps and run showers whilst viewing a property. In fact, while you’re at it, flush the toilet too! Plumbing can be a huge expense and being prepared for repairs is incredibly important.
- Leaking taps – check under the kitchen sink to see if the cupboard has sustained water damage. If it has, find out when the leak was attended to.
- General leaks – while not always possible, it would be wise to view a home after heavy rains, as this will make it clear if there are any leaks in the ceiling or walls.
- Rotting wood – check the wood in the home to see if it is adequately sealed and treated. Wood that rots will need to be replaced later.
- Faulty plugs – it is a widely-spread tip to bring a phone charger to a property viewing. Checking each plug could reveal a larger electrical fault. The seller will also need to produce an electrical certificate to prove that everything is in order.
- An alarm system & electric fence – having this infrastructure already in place can save quite a bit of money and provide tenants with a better sense of security.
- The roof – look out for missing tiles, as this could lead to water damage in the ceiling. Find out when the roof tiles were last replaced, as the lifespan of these tiles is usually twenty years.
- The pool – a pool can be an attractive feature for tenants, but will require regular upkeep. Repairing a pool can be an expensive task if it is not cared for correctly. Our lease protects landlords should their tenants not keep up with regular cleaning.
- A large garden – while this is sure to be in high demand, it will require watering, mowing and treatment to keep looking healthy. Tenants are not always reliable when it comes to maintaining the yard, and dead grass will then need to be replaced. Large trees are also a potential hassle when it comes to raking leaves and trimming overhanging branches.
A word on property management
Enlisting the help of a property manager will make renting a much easier process. As Property managers we ensure verified tenants are secured and manage any maintenance that is sure to arise. With a network of contractors and experience with common repairs, your property manager can make your investment work for you without the stress.
The Mandatory Disclosure Form
Viewing the Mandatory Disclosure Form, or property condition report, is an excellent way to get an idea of the defects of a potential investment property. While this report should indicate any serious problems, it is always advised that a prospective buyer have their own inspection done to be certain that there are no latent issues lurking.
In conclusion
Ultimately, the decision to purchase a property for the purpose of rental is to make an income. Consider whether the property you have your eye on will be appealing to renters, and if its upkeep will match what you are prepared and able to spend. With time, more items will need repair or replacement. If your home cannot reasonably demand a higher rental per year, you may need to rethink your purchase with this in mind.
FAQs:
You should research the area you are interested in buying in to make sure that it is safe, central, and provides access to convenient amenities.
You should also look at the property condition report to identify any defects on the property, as well as conduct your own inspection to search for damage.
In short, yes. South Africa offers first-time buyers a subsidy, and government employees receive a further subsidy towards the purchase of their home.
In addition, when an individual applies for a bond with the intention to buy-to-let, financers account for 25% of the potential rental income towards your existing income to calculate affordability.
Property24 has reported that house prices have dropped in 2022 already, and that they will continue to decline in the next few years.
Just Property CEO, Paul Stevens, has said that there is “a favourable environment for buyers and property investors alike,” and emphasised that there are many South Africans looking for affordable housing. Reports from several sources have also confirmed that many people are moving to Cape Town thanks to remote working.
Investing in buy-to-let property in Cape Town is an excellent idea, as multiple sources have reported a semigration to Cape Town. People from South Africa and abroad are flocking to the Mother City thanks to remote working opportunities, and rentals will be in high demand.