Now’s the time to enter the South African buy-to-let investment market
As current buy-to-let property investment opportunities gain attention, investors are warned to choose their property managers with care.
A report from First National Bank this month shows that “69% of its Gold account holders are renting instead of buying property and 44% of Premier customers demonstrate a similar trend. This is despite the cost of rental being not much lower than the average bond.” (According to FNB, their Gold account holders earn between R7,000 and R25,000, while Premier customers earn from R300,000 to R750 000.)
Lynette Kloppers, CEO of FNB Premier, says “The income disparities between the Gold and Premier segments are quite vast but the common denominator is the reluctance to step into the property market, which may be due to real or perceived barriers. We believe there is room for people to buy into property either for self-occupancy or as an investment especially for consumers in the higher earning spectrum in the premier segment.”
Property analyst’s data backs up this advice, particularly with regard to buying investment property. FNB’s own John Loos noted the growth in house prices last year was outpaced by the growth rate of flat rentals. According to property economists Rode & Associates, the fourth quarter of last year saw an annual growth rate of 6.4%, outpacing inflation. It comes as no surprise that this is driving “definite growth” as the number of investors purchasing buy-to-let apartments instead of houses increases.
Pieter Piek, head of sales at Just Property’s Investment Division in Cape Town, says that with the banking institutions’ loan-to-value being higher on apartments than on building loans for free-standing houses, investors are making use of the opportunity to “rather use the banks’ money to make money”. By spreading the capital into multiple deposits for apartments, an investor can fast-track property portfolio growth. Piek uses the following example to illustrate the point: “Instead of paying the R200,000 deposit on a free-standing (plot and plan) house valued at R1million, with an 80% loan-to-value, the investor can purchase three or more apartments by spreading the R200,000 deposit with a 100% loan to value, even if it costs R1million for each apartment.”
Those looking to enter the buy-to-let market and those with growing portfolios would do well to heed the words of Charliene Hoffman, General Manager at Just Property Invest: “While buy-to-let investors can do research into properties on the market themselves, there are two areas where expert management is imperative: your investment and its process, and the rental. With the right assistance and guidance, not only would you be investing in your wealth, but also in your time.”
“You may make more money by renting the property out yourself but be prepared to give up your weekends and evenings to attend to viewings, advertising and maintenance,” adds Piek.
“A property management agent takes this hassle off your hands and will deal with any problems. A good agent will have a network of plumbers, electricians and other workers at their disposal, should things go wrong.”
Choosing an investment property manager
When picking your property manager, select a shortlist of agents and ask them what they can offer you. Weigh up their services, costs and what works for your investment model.
Services should include rental collection, tenant vetting – including credit reports, incoming and exit inspections, timeous and professional attention to maintenance issues, and handling all communication relating to tenants with body corporates.
In addition, the agent should have excellent knowledge of the local rental landscape, a good network of trusted tenants with excellent track records and, most importantly, impeccable qualifications and credentials, including a Fidelity Certificate.
Piek recommends that you focus on established real estate companies and their agents: “With an established company like Just Property, you will be offered a great security product which guarantees your rental income, regardless whether the tenant paid or not (Rent Secure).”
Just Property Invest focuses on property developments that yield higher than the average return and are specifically aimed at the residential property investor. The firm has more than 12 years’ development, marketing and sales experience aimed at the residential property investor, which has resulted in more than 10 000 sales transactions concluded over this period.
“Due to our relationships with property developers, liquidators, banks and other financial institutions on a national basis Just Property Invest receives access to various property investment opportunities on a regular basis,” notes Piek.
Just Property Invest also forms part of the ever-expanding Just Property, with more than a 100 franchises all over South Africa.
There are excellent opportunities within the buy-to-rent investment sector, and a good Property Manager will make sure that the tenant-rental process runs smoothly every month. “They have your best interests at heart and look after your investment on your behalf – after all, their reputation is riding on it!” Piek concludes.
Speak to one of our friendly consultants today and get personalized advice on how you can start building your property portfolio now!
Also published on Property24.com