The property market has proven resilient, with many experts suggesting that if you're financially sound during this time of economic upheaval - it's possible to capitalise on the current market conditions, which sees the bond interest rate at an historic low of 7.75% - with talks of more cuts.
Brad Morgan, property consultant for Rawson Property Developers shares his take on Buy-to-Let investments right now saying, "You can use the banks money to start investing, so you don't have to have cash, while letting a tenant cover the bulk of your costs - which makes it really appealing."
With some eight years’ experience as a property consultant and having spent the last six years with Rawson Developers, Morgan says the current offering for its Westwood and Newlands Peak developments is "unlike anything he has seen in the market".
It specifically looks to address the biggest concerns with investing in a buy-to-let property - which are essential the starting costs, but ultimately the need to have secure rental income to cover the bond payments for the investment.
The latest offering by Rawson developers makes it possible to secure a "luxury apartment for about R765 per month".
READ: Deeds office to operate on Alert Level 4, as SA eases out of hard lockdown
"With the recent announcement that the South African Reserve Bank have cut interest rates by 100 basis points for the second time this month, the Repo rate now sits at 4.25% and the interest rate at 7.75%," says Morgan.
"With this in mind we have created a handful of incredible investment opportunities for first time buyers as well as seasoned investors.
"The Westwood is a brand new luxury development in Upper Observatory. Having already sold over 80% of this development we still have a few opportunities remaining for investors and first time buyers with completion expected in Q4 this year.
"Essentially, investors can secure a luxury apartment for only R765 per month!"
Of course this seems rather too good to be true. But Morgan outlines the costs and benefits as follows:
In short, you can own a apartment for just R 765 Per month -On a R 1,575,000 apartment
- You get the R 100 000 off, if purchased in April ( so R 1,475,000 )
- A 90% bond will cost you R 10 898 per month at the prime lending rate.
- Rates and levies are R 1667pm
- Total monthly cost - R 12 565pm
- Guaranteed monthly rental - R 11 800pm
Your monthly payment - R 765 pm
Benefits of buying now include:
- R 100 000 off the asking price
- Upgraded finishes at no additional charge
- Double glazing at no additional charge
- Guaranteed rental for 1 year
- No transfer fees
The above values are calculated using the current prime interest rate of 7.75%. Morgan says while units are limited on the Westwood opportunity, investors will be able to secure a similar deal on their Newlands Peak development - which is set to be open later this year.
READ: A look inside the stylish Newlands Peak, Cape Town’s hot new development
"Historically, capital growth in an area like the Southern Suburbs will work in any buyer's favour," says Morgan, "There is a huge demand for student accommodation in this area, with the new Westwood development some 350m from UCT Medical Campus."
"Cape Town, historically has been good for capital growth, as it is a great place to live or come on holiday. This is one of the reasons we're focused here."
But investing in a buy-to-let property also makes the investor a landlord, which in turn comes with its own set of challenges. However, Rawson Developers have also factored this in, he says.
"We have a team that handles the rentals for all of our developments, making it easier for an investor who does not want to deal with finding a tenant or specifically tenant issues. It is particularly valuable for investors who are out of town. The normal cost would be 10% of the rental income. This would apply for your second year, but in the first year, along with the rental guarantee, we waive this charge as an extra incentive on our current investment opportunities.
"Your rental increases in the second year anyway, so if it does so by 10% you would have covered that cost additional cost, if it's less than 10%, then the added cost is marginal and should not break the bank."
And while markets are cyclical, Morgan has the following advice.
"It's often tricky to know what part of the cycle we're in. We've had buyers in the past who put down their 10% deposit for a development and when the development opens 18 months late they've sold it for 50% more. If you get this right then it's amazing. However, it's important to know that this is not always the case. As an investor you should be looking to get into this for the long term. If you have amazing short-term growth, selling is always an option.
READ: Paying your bond off faster, like 5 years faster, has never been easier
Ideally Morgan says you would want to keep this investment for some time.
"Every year the rental income increases with inflation but generally your bond payments remain the same. This means after some time you will break even and you won't have to contribute to your bond costs. And eventually, you'll be making a profit, which can then be used to pay off the property faster or used to buy a second investment property.
Morgan says, "Right now is a great time to buy. With what is going on with Covid-19 there is definitely a slowdown in the market and because of that there are without a doubt some amazing deals coming out.
"We have had to create some irresistible deals to stimulate sales in a time where people are generally a bit apprehensive to commit to anything. This combined with the reduced lending rate makes now a great time to get into the market"
*This article has been updated to reflect the current price point. All prices subject to availability.
Print
