Are You Thinking About Buying To Let?
Category Property Advice
Investing in buy-to-let property is definitely an appealing prospect. It is easy to understand why so many South Africans have decided to get behind this property trend. Performing particularly well in many parts of the Western Cape, where the demand for rental properties is quite high, buy-to-let has become a viable option for those wanting to grow their property portfolios.
However, when you decide to buy a property for the purpose of renting it out to tenants, you have to look at several contributing factors, not only the historical performance of this investment type.
Here are some things to keep in mind when looking for a buy-to-let property:
When you pick an area or neighbourhood, remember to do so from an objective standpoint. You are not planning on living here personally, so consider where prospective tenants might want to reside.
Try to invest in a property that is already in a rentable condition. When you have decided to let out a property, you should stick to a short time frame in which to make improvements or fix maintenance issues. Otherwise, you run the risk of ending up with a vacant property.
Conduct some research on the area you have decided to purchase the property in. Look at how much demand there is for rental properties and how much other landlords are charging on a monthly basis - this will help you gauge how much you should charge. A great way to do this is to work with an industry professional, who will be able to give you the best advice.
Benefits of Buy-to-Let
- Buy-to-let properties are generally very reliable sources of investment.
- You can benefit from a dual income. As property values tend to appreciate over time, your investment will grow. Another way to profit is by the monthly rent that is paid by the tenant.
- Apartments are the ideal buy-to-let properties. They typically cost less than a house, which means that you can get quicker returns.
- Investors can also profit by finding steady tenants, as long-term rentals ensure continuous and predictable monthly income.
An Example of How it Works
You have decided to buy a two bedroom apartment for R1m and pay a downpayment of R100 000. You take out a loan for the remaining R900 000, at 10% interest to be paid back over a period of 10 years. This eventually equates to repayments of approximately R12 000 per month.
After looking at the financial side of your investment it is time to research the property market in the area. While investigating the current market, you discover that there is a big demand for two bedroom apartments and that rentals average around R15 000 per month.
Following your research, you purchase the property and decide to list it at R14 000 per month.
Now there is an opportunity to get a tenant that will effectively pay off your bond to the bank in a shorter amount of time, or make an extra R12 000 each month - which will alleviate your cash flow.
Looking for The Ideal Buy-to-Let Property?
Currently available is a great two bedroom apartment in Green Point listed at R3 995 000. This newly renovated abode consists of 82 sqm, north-facing, with views of the harbour and V&A Waterfront. Including a large living area and a fully fitted kitchen with granite tops - this property is perfectly equipped for a small family, young couple or business professional. Located in a highly popular suburb of Cape Town - finding a tenant will be a breeze.
Contact the dedicated property team at Knight Frank to get more expert advice and find the perfect investment property for your portfolio.
Author: Knight Frank
