Real Estate Investor Magazine South Africa April 2015 | Page 8

ASK THE EXPERTS Q&A Q Q A A A I R Q Q Charlotte Shiburi asks: I want to know how much can I expect to spend when building a duplex or small rooms in my backyard and renovate a four bedroomed house in Soweto? A Neale Petersen of Real Estate Investor Magazine answers: t depends! It depends on the size of the property. It depends on who the builder is. It depends if the builder is registered with the National Home Builders Registration Council (NHBRC) as many builders like cash to be paid upfront and then complete the job properly. My suggestion is to appoint a reputable architect and builder first and get quotes from three of them before you start. Do an evaluation on your property and a Comparative Market Analysis (CMA) of the area to see it warrants adding on another duplex or room. Compare quotes from about five registered builders in your area. After an evaluation of the property, draw up a budget of how much you can afford to spend. Factor in the cost of any potential unexpected shortfalls for any repairs. Then, stick to this budget! Q Chris Leighton asks: I have recently come to understand that banks no longer take any rental income into account when determining affordability for buy-tolet investment purchases. That seems to not acknowledge the fundamental principle behind the whole buy-to-let concept. Am I missing something? A Meyer De Waal of My Bond Fitness answers: ental income can be used to boost your income, as the ability to repay the loan, being ‘affordability’ remains one of the three ‘legs’ to conclude a home loan application. A bond debt and repayment increases your debt exposure. A lender (bank) will look at your increased debt repayment vesus the rental income, plus other income like your salary to calculate your actual affordability. Unfortunately, the entire bond repayment will be added as an expense and exposure, while only a portion of the rental income will be added to boost affordability. The banks have different ‘scorecards’ in assessing the ‘weight’ of the rental income. Some banks will add more ‘weight’ if it is a customer of the same bank, and if the lease is 12 months or longer. It appears that on average only 50 % (sometimes 40 %) of net rental income is added to boost the affordability of the application. Q Marieta Louw asks: Our deck is leaking. We need a deck cover but the Home Owners Association (HOA) have gotten a court order for its removal. According to the original rules when we bought the land from trustees, and not the amended architectural guidelines, it is legal. Any thoughts? A Michael Bauer of IHFM answers: T he first question to ask is, “Have the amended rules been filed?” What is not clear is which legal entity the HOA is (i.e. a land ordinance or a company). The process of registering amended rules or constitutions differ. Another question is, “Did they obtain a stamped copy of the constitution to ensure the new rules are indeed registered?” If they were not registered, then the old rules still apply and you can proceed or defend your case on that basis. If the new rules were registered and are valid, then they are in breach of the constitution. The next question is, “Are there other owners who have done that?” If so, you can defend it if there is a precedent in the HOA and the trustees have tacitly accepted this change of design. Another alternative is an attempt to change the design guidelines, but this is a difficult task. Your constitution will advise on the process and resolution required. Do you have a property question you would like answered by our experts? If so, post it on ASK THE EXPERTS on www.reimag.co.za or email [email protected] 6 April 2015 SA Real Estate Investor Ask The Property E