As a young professional, isn’t it time you bought a property or a share in one? You can!
Paul Stevens, CEO of Just Property, has some advice for young, aspiring property moguls says, in South Africa, with its combination of economic challenges, urban hubs, and a young, dynamic population, sharing accommodation when you’ve got your foot on the first rung of the corporate ladder is a no-brainer.
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But isn’t it even cleverer to dip a toe into the property market? Four or five like-minded friends who form a syndicate, pool their resources, and buy a property together in their 20s will be way ahead of the pack – and on to their second or third property – in just 10 years' time, especially since it is currently a buyer’s market.
Of course, there are some considerations. Stevens offers advice to young professionals who might be considering joint property investments and on the legalities new landlords need to consider.
1. Joint property investments for young professionals
Historically, property syndicates have been a popular choice for those wanting to tap into various property sectors, be it commercial, residential, or retail, says Stevens. “While individual properties bring in steady cash flow and some tax benefits, joining hands opens up the potential of building a property portfolio that might be unattainable solo. Plus, with co-investors, the risks are distributed.”
This is even more pertinent for young adults who are still at the start of their careers. Stevens believes that the sooner one dives into the property market, the better. Later in life, financial responsibilities are far greater, he says.
“Rather cut back now on the rent you’re paying into someone else’s pocket, downscale the car you drive and other depreciating assets, and focus on amassing future wealth.
“Forming a syndicate with fellow young professionals is a great idea as long as you follow certain important pointers.” Stevens shares these below.
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2. Keys to a successful syndicate
These are the keys to successful investment syndicates:
- Communication and alignment: Stay on the same page regarding your property goals and the principles to achieve them.
- Shared responsibility: Ensure everyone knows their role in the venture.
- Clarity in strategy: Define your focus. Are you aiming for short-term gains, regular rental income, or a long-term gamble on an emerging area?
It's essential to think about how the number of members affects property usage. Will some or all of you be sharing the premises? This can make things complicated. Get professional advice and agreement upfront.
3. Scanning the current market
According to Stevens, new properties and off-plan purchases often offer significant savings on certain fees and duties.
“Distressed property sales, like those at auctions, could also offer properties at a markdown, but there are risks. Don't just look for the cheapest deal,” Stevens advises. “Rather find the places where value can be added, like potential for subdivision or rezoning."
Familiar areas and property types might feel less risky, but it’s still a good idea to get as much information as you can from a property professional who knows the value and history of property transactions in a particular node.
4. Call in a legal eagle
Once you've zeroed in on a property, it's important to have a comprehensive, signed agreement between the investors. This minimises ambiguities and the chances of misunderstandings. Key questions your agreement should address include:
- Financing methods.
- Costs breakdown: bonds, maintenance, taxes, etc.
- Repayment details.
- Contingencies for missed payments.
- Property usage guidelines.
- Exit strategies for members.
- Portfolio management.
- Communication protocols.
"Agree to the governing rules upfront and map the potential pitfalls. Insist on complete transparency and shy away from anything that isn't clear-cut," says Stevens, who stresses the need for robust legal counsel, financial advice, and skilled property guidance.
5. So now you’re a landlord…
Paul has some advice for young landlords.
1. If you’re looking at renting to students, it is highly recommended that one (or both) of the student’s parents sign the lease agreement as a tenant with their child as the occupier. This will have the effect that they would be jointly and severally liable in terms of the lease agreement as the student. This will safeguard the landlord from a situation where a student fails to pay his rent. If the parents are tenants, the moment the student is in breach of the lease agreement, be it by not paying the rent or by not complying with the house rules, the parents will also receive the letter of demand and the prospects of resolving the matter amicably and effectively increase dramatically.
2. If you all decide to live in the property you’ve bought, this will pertain to you, too. Remember that the Rental Housing Act deals with multi-let accommodation, specifically in requesting the landlord to formulate a set of house rules to regulate the relationships between the occupants of a multi-let property. These house rules can deal with things like sleepovers, study times, pets, and parties at the premises, as well as details around the do’s and don'ts in the communal areas. It is advisable to display these house rules throughout the property and to send reminders of the content to all tenants on a regular basis.
3. The Rental Housing Act is very clear on the terms that have to be included in a lease agreement and the things that have to be dealt with. Make sure you comply.
4. It is definitely worth your while to pay for the services of a managing agent who can ensure that the lease covers all requirements and eventualities, has the time and resources to properly vet the credit history of prospective tenants, will collect rent and deal with any non-payment issues, plus has trusted service providers on tap for any maintenance.
“Last word of advice? Go for it!” Stevens encourages. “I wish I had sooner! I am passionate about property as a wealth-builder.
READ: How to make multi-generational living work for the whole family
In an article publishes in 2019, Craig Mott, Cape Town Regional Sales Manager for the Rawson Property Group, touched on multi-generational homes.
“That’s not to say living with your parents or grandparents as an adult is without challenges of its own - particularly if you’ve grown used to having your own space and are new to a communal living environment.”
According to Mott, there are ways to make the transition (and general experience) much easier for everyone involved:
1. Plan your space
A single family home and a multi-generational home should ideally look quite different, since each generation really needs a space of their own in which to enjoy some solitude and privacy. Of course, not everyone is lucky enough to have a convenient granny flat to provide easy separation when necessary, but a few minor renovations can be just as effective in a crunch.
Mott highly recommends adding a small kitchenette and en-suite bathroom to a second bedroom or living space if possible. This gives the elderly or young professionals living with their parents the ability to do most daily activities without having to join in with the main house if they don’t want to.
Done well, it can also add value to your home when you decide to sell.
Garages are often the focus of renovations for creating a secondary living space, but be cautious to have plans approved and not to do any revamps that will affect the sale price of your property down the line.
“The ability to take time out in your own space is essential. A little bit of autonomy goes a long way towards creating a peaceful and happy multi-generational home,” he says.
Homeowners need to take the physical challenges of old age into account when planning a multi-generational layout.
It’s always a good idea to give elderly family members ground floor living spaces with no stairs or potential tripping hazards. Depending on their level of health and activity, you may also want to keep them close enough to hear them call for help if they need a hand.
2. Lay out the ground rules
One of the biggest benefits of multi-generational living is that all residents can contribute to the household. According to Mott, those contributions don’t always have to be financial, but should be planned and agreed to in advance.
“Unemployment and other financial difficulties are often the reasons kids move in with their parents or vice versa,” he says.
“That means it’s not always possible for everyone to share expenses like food and rent equally. Make sure you discuss finances upfront, as well as other household contributions like cooking, cleaning and childcare, and make sure everyone is happy that they’re doing their fair share to add value to the home environment.”
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3. Have a plan in place for conflict resolution
Human nature means no home is ever entirely without conflict, and having family members from various generations under one roof means disagreements are bound to arise. Having a plan in place for handling these situations when they happen is important not only for keeping peace in the home, but also making sure everyone feels like their concerns and opinions are being heard.
How you decide to handle conflict may depend on the living arrangements that you have. If everyone is sharing household responsibilities equally, then it may be appropriate to vote on all major decisions. If one generation is footing the entire bill for the home and all its occupants, on the other hand, they may want the final say.
“Either way, it’s always best to discuss any changes and talk through disagreements as calmly as possible. You won’t be able to keep everyone happy all the time, but you can certainly make sure everyone understands each other’s viewpoints and considers the feelings of those around them before making decisions that affect the whole house,” says Mott.
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