RENTING
Advice for Long Term
Property Investment
Tips for buying Investment Properties
BY JASON VORSTER
B
uy-to-let is an attractive income
investment in a time of low rates and
stock market volatility and has seen a
strong resurgence in recent times. But beware the
low interest rates. One day they must rise and you
need to know your investment can stand that test.
Nevertheless, despite the potential for interest
rates to rise, the current lower house prices, rising
rents and improving bond deals are tempting
investors once more.
If you are considering investing in property in
2014, or improving your returns on a buy-to-let
you already own, it’s important to do things right.
Like any investment, buy-to-let comes with no
guarantees, but for those who have more faith in
bricks and mortar than stocks and shares, below
is some advice to get you on your way.
Location, location, location
It doesn’t matter how many times you have heard
it before - location remains the most important
factor when buying property. When you are
buying for investment, in other words buy-tolet, you have to look out for locations that have
high rental demand. Look out for major facilities
in close proximity, such as schools and shopping
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Residential Handbook 2015
malls. Notice if there are any infrastructure
developments taking place in the areas, which
would be more profitable and attract rentals.
Don’t be over-ambitious
We have all read the stories about buy-to-let
millionaires and their portfolios. But the days of
double-digit house price rises are gone.
To compare different property values, calculate
their yield: the annual net income (gross income
received less expenses) divided by the purchase
price, and multiplied by 100 to get a percentage.
For example, a property with a R650,000 purchase
price, delivering R60 000 in rent annually after
expenses, will deliver a 9.23% net yield in the first
year.
If you can acquire a rental return substantially
more than the bond payments, you can start
saving to build up an emergency fund or invest
any extra cash you have. Remember though,
people rarely buy a property outright and they
come with running costs, so bond costs, agents
fees must be worked out and they will eat into
your return.
Once bond, costs and taxes are taken into
account, you will want the rent to build up over
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