Purchasing A Property To Rent Out
Category Buying Advice
Purchasing a property to rent in Cape Town requires consideration. The Cape Town property market offers a wide array of investment properties, and finding one that is suited to your finances and available in the right location will be a great benefit. In the long term, your investment rental property could offer you a holiday home or be available to other family members. Our agent at FMS Sales & Leasing can help you with all of your needs, whether you choose to buy a rental property or are interested in anything else property-related.
Property Considerations
Purchasing a rental property is a simple enough thought, and it is a good investment, particularly in a cosmopolitan city like Cape Town. However, when deciding to purchase a property to rent out, there are a few questions that need to be asked. Do you want to be a landlord? Do you know enough about property management and tenant relationships? Are you able to cover the shortfall of the rental payment?
Being a landlord is an excellent way to earn additional income and grow your property portfolio, however, it may be more work than you anticipate. Carefully consider how much of your time will be spent dealing with tenant queries, concerns, and property maintenance issues; if you are not up to the task, consider a property management agency. In most cases, the tenants occupying your property will not cover the entire repayable bond cost, which means you will be responsible for the shortfall as well as municipal levies and additional taxes. Consider how much of your monthly income you will have available to cover these costs each month, as they will vary. It is better to allow yourself the financial space to cover any additional costs than to be financially limited.
The Financial Aspect
Even though purchasing a property to rent may be beneficial financially, it is important to take into account the initial costs involved. These include a down payment on the property, administration fees, i.e., professional contracts, as well as homeowners insurance, levies, and taxes, utility costs, and advertising costs when looking for a tenant. Your bond payments are another important cost. As previously stated, your total bond repayment may not be covered by the occupants of your property, and you will be responsible for making up the difference, including levies, taxes, and potential homeowners association fees. In South Africa, taking on a large financial burden is a big risk; ongoing interest rate hikes and a looming global recession will affect your overall costs. When deciding to purchase a property to rent out, make sure that the return on your investment will make financial sense.
Location
Despite costs being one of the drawbacks of purchasing a property to rent out, the location of a property will often boost its potential rental income. Renters are often looking for convenience when considering where to rent. Similarly, purchasing a property in a neighbourhood close to several amenities that fit the 'work, live, play' lifestyle will be advantageous, attracting the right kind of tenant to your property. As a result, you can set a competitive rental price for your property and maximise the return on your investment. In Cape Town, where new developments are regularly being built across the city, finding a 'buy-to-rent' property at an affordable price is guaranteed. Having reliable tenants occupy your property will give you peace of mind that your investment is being well cared for.
When deciding to purchase a property to rent out, be sure to do adequate research on all the aspects involved; financing, location, and tenant relations. Taking your time to decide will deliver the best outcomes, minimal cost involvement, satisfied tenants and a great return on investment.
Author: FMS Sales and Leasing
