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In it for the long haul

Property investment

No matter the market, property remains a good investment and investors who do their homework, can yield excellent returns in both the short and long term

No matter the market, property remains a good investment and investors who do their homework can yield excellent returns in both the short and long term when they buy to let

Entering the rental arena will always be an excellent investment, offering rental returns in the short term and capital gains in the long term, says Lorraine-Marie Dellbridge, rentals manager, Lew Geffen Sotheby’s International Realty in Cape Town’s Southern Suburbs, Noordhoek and False Bay areas.

“Not only is the interest rate currently lower than it’s ever been, but property prices in Cape Town are also more accessible than they’ve been in many years and buyers have a lot more options. However, with semigration to the Western Cape on the rise again, this window of opportunity won’t last long, especially in the more sought-after areas with excellent amenities and schools,” she says. “Although the rental market is currently overstocked, with Covid vaccinations on track and tourism likely to pick up, many of the rental properties will become short-term lets.”

Keep in mind

She says it can be costly to make assumptions when you buy to let. “For instance, if an area is popular with young families, then a two- or three-bedroom flat would be a better investment than a one-bedroom apartment, even if it’s absolutely stunning and has better finishes.” And if you are buying property in an estate or complex, add scheme management to your list of priorities when choosing a property, especially if there will be budgetary restrictions. “Sectional title levies are used to cover various expenses such as insurance, administrative fees and the maintenance costs of the common property and on-site facilities, and the more amenities there are and the larger the grounds, the higher the levy.”

What the tenant wants

“When deciding on a property, consider what a tenant will find attractive. If it’s in a suburb near a university, consider why a student would rent your property rather than another. If it’s a family suburb, consider what a family would need from a home, including proximity to schools, parks and convenient shopping.”

Dellbridge cautions investors to consider their options before deciding and to heed advice when pricing a property for rent. “The rental may not cover all the expenses such as the bond, levies and property rates for up to three years. However, property is a long-term investment that will increase in value over time and can begin to pay for itself within a relatively short period.”

Points to ponder

While your property stands empty, you still need to pay your bond, municipal costs and levies. The trick is to be competitive with pricing while ensuring you place quality tenants. Dellbridge says that although it may be tempting to save money and do things yourself, it’s advisable to use an experienced agent who has knowledge of the area, and all the laws and regulations governing this sector. “Landlords should always seek expert advice when drafting the lease to ensure it’s compliant with legislation and covers all the responsibilities of landlord and tenant.”

The lease agreement

According to co-principal Arnold Maritz, when you buy to let it’s important that both tenant and landlord have a clear understanding about who is responsible for which repairs, and this should be fully covered in the lease document. “Landlords or their appointed agents must always conduct documented incoming and outgoing inspections to keep track of damage to the property and to catch and repair any budding issues before they become real problems.”

Landlords must bear in mind that the tenant is a key factor in the upkeep of their investment and that their impact is two-fold. “The better tenants take care of a home and the more a landlord keeps tabs on the property, the less maintenance there will be. Landlords should work with tenants as happy lessees are more likely to look after the home,” he says.

Maritz adds that it’s critical for owners to have the best insurance policy they can afford and, if possible, to start putting money aside for maintenance and repairs. “Emergency repairs like burst geysers are not uncommon and can wreak havoc on one’s cash flow as they require an immediate outlay that few people can spare.”

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