Investing in property is one of the best ways to build wealth and the sooner you start the better, says Samuel Seeff, chairman of the Seeff Property Group. While it is ultimately about securing the roof over your head, you are at the same time investing in a valuable asset.
READ: Exploring property transactions: an A-Z guide
An important benefit is that you can finance the purchase with a home loan. While rents go up yearly, your monthly repayments will remain fairly stable, subject only to interest rate fluctuation. Eventually you will pay less than the prevailing rents in the area, and once paid up, you can live rent free.
At the same time, the property will also grow in value. According to the StatsSA Residential Property Price Index (RPPI) for example, values rose by between 71% (Johannesburg) and 141% (Cape Town) since 2010.
Making money from your property
The banks always value property ownership. If you want to start your own business, you could take a second bond (if there is value in your property) and use the funds to finance the new venture.
You could use a second bond to purchase a second property for rental investment purposes, but Seeff says be aware of the pitfalls of rentals.
If you are financially able, you could sell the property for a handsome profit which can be invested as a good deposit on a bigger or better property.
You could rent out your property. If you are cash-strapped, or need to work in another location, you could put your home into the local rental market.
If you need help with the home loan and upkeep costs, you can rent out a room or get roommates to share the accommodation and costs.
Renting out a garage for storage is another opportunity. People often need to store things for a variety of reasons, and you could charge a fee for this.
Depending on the location, you can create an Airbnb, especially if you have a nice room with an en-suite bathroom and your property is in an ideal location.
You could turn it into a guest house in its entirety. It may require more administration compared to residential tenants, but can be financially more rewarding.
You could create a start-up business from home and save on rent, provided there is no noise or parking nuisances, and the business complies with local municipal bylaws.
Subdividing and selling part of the land, or developing a sectional scheme with a second dwelling (and up to a third in Cape Town) on the same property to sell or rent out could be another opportunity.
Do your homework
Local municipal bylaws dictate what can be done, and what approvals need to be sought. Always check up on these. Subdividing and rezoning is more complex and costly, and you need to consult with a property attorney.
If you are renting out the property or sharing accommodation, enter into a proper lease agreement which protects your interests and ensures you are not stuck with someone who does not pay rent or deliver their part of the deal. Shared duties and responsibilities should be included in the lease.
Any income earned from your property will likely be subject to tax, although there is usually the opportunity to deduct expenses (not of a capital nature), incurred in connection with generating the income such as marketing, cleaning, maintenance and so on.
READ: Agents and clients | Safety measures to consider when selling and letting homes
In an article published in May, Adrian Goslett, Regional Director and CEO of RE/MAX of Southern Africa, shared tips on how to price your rental property.
“Overpricing your property may result in longer vacancy periods, while under-pricing could attract tenants who cannot truly afford the property. Those who set rental rates that are competitive and are in line with market trends are more likely to attract quality tenants,” he adds.
When deciding what rent to charge, a landlord can either conduct some research themselves or allow a rental agent to tap into their resources for a more accurate view of the following:
Competitive market analysis:
Review the rental rates for properties that compare with yours in terms of size, location, and amenities. This will help you to establish a baseline on which to determine a competitive rate for your property.
Take vacancy rates into consideration:
If there is a large number of properties to let in the area, you may need to carefully consider adjusting your rental price to attract consistent and reliable tenants.
Consider local economic factors:
Take into consideration what is happening in the local economy before setting the rental price. When things like interest rates, inflation, and unemployment levels are high, then rental prices will need to reflect that reality.
Internal and external drawcards:
The unique features that set your home apart from other similar rental homes in the area can help you charge a higher rate. Nearby employment opportunities, infrastructure, and access to amenities (such as schools and hospitals), and crime levels can all influence the property’s appeal to prospective tenants and can push up rental prices in the area.
READ: Maximising opportunities in a thriving rental market
After pricing the home correctly, landlords will then need to select the best applicant. A professional rental agent will screen prospective tenants on a landlord’s behalf to ensure that they have the best chances of securing a reliable tenant.
“A good rental agent will talk to the tenant’s previous landlords and employers to get a better understanding of the tenant's overall character and reliability. They will also verify their income and run a credit check on the prospective tenant to make sure they do not have a history of missing payments or making late or partial payments,” says Goslett.
To give your rental property the best chance of success, Goslett recommends enlisting the help of a managing rental agent. “Your local RE/MAX office will help you find and retain good tenants so that you can achieve long-term stability and profitability from your rental properties,” he says.
Want all the latest property news and curated hot property listings sent directly to your inbox? Register for Property24’s Hot Properties, Lifestyle and Weekly Property Trends newsletters or follow us on Twitter, Instagram or Facebook.
Print
