Tips for when Purchasing Investment Property
Despite an interest rate hike soon (after having gone through one recently), the buy-to-rent market is still a good one to get into if you wish to use property as an investment.
26/05/2022
Purchasing an investment property continues to grow in popularity due in the main to the increased growth for sharing a home and the increase in demand for rental properties, particularly amongst the younger generation, who prefer to rent rather than own. This according to a survey undertaken by Deloitte.
There might be a hike in interest rates on the horizon, even though we have only just had one, but the buy-to-rent market remains an excellent investment opportunity for those wanting to buy property.4
Below we offer six tips for those wanting to go invest in property:
Choose Your Location Wisely
“The location for an investment property is a prime factor when you decide to take this route,” says Wilmot Magopeni, Franchisee Leapfrog Sunshine Coast. “Targeting a particular demographic say students for example, will mean that you will want to select a location close to a university. For properties where the workforce is your target market, being close to the city would be best solution.”
There are other factors that require careful consideration when looking at investment properties such as easy access to public transport, local schools, and the closest shopping. And do not overlook the demand for rental properties in a selected area.
“Where you come across a possible investment property that is not in good condition but located in a good area, negotiating a lower price will provide you with the funds to upgrade or improve,” advises Magopeni.
Be Realistic With Your Expectations
“Landlords who have purchased investment properties have realised that there is a great potential for an excellent return on their investment, but that doesn't mean that it will be the same for everyone,” Magopeni notes. “With the property market valuation decreasing, it is important to manage your expectations when making the ultimate decision.”
It is important to always keep in mind how the interest rate will impact how much profit can be made from the rental property, specifically after paying the monthly bond fee. Additionally, further hikes in the interest rate should be taken into account as this will affect the bottom line and subsequently your investment.
Look Outside Of Your Comfort Zone
When selecting an investment property, you need to look around at other areas rather than only concentrate on where you live. You may not be able to afford to purchase an investment property in Cape Town, but that doesn't rule out other areas, and perhaps you can afford to invest in a prime location in another city.
It is in your best interests to discuss your requirements with a property professional and a property group such as Leapfrog is perfect to help in this regard. Leapfrog has franchises throughout South Africa and you can get in touch with them for advice and tips on purchasing investment properties anywhere in Africa.
Budget For Upgrades
No matter the investment property you decide upon, there will almost always been some form of upgrade required or improvements that could be made, even though it may not be a massive renovation but something as simple as a fresh coat of paint or updating fixtures and fittings.
“This not only adds value to your investment, but it will also make you feel as though you’ve put some of your input into the place,” says Magopeni.
Don’t Accept The First Bond Offer
Shopping around for better deals should be a major consideration before signing for a bond. By keeping your options open you may well discover that you can negotiate for better interest rates.
It is essential that you work with someone like a bond originator that can handle the processes on your behalf, an organisation that can do all the negotiations for financing and additionally be able to offer expert advice on what the best offer on the table may be.
Enjoy The Experience
Purchasing an investment property or a place to live is a life-changing step that may just be the largest step you ever make, so be sure to enjoy the process and take advantage of being able to shop around.
“Celebrate the wins and once it’s all locked in, be grateful for the ability to invest in this manner,” Magopeni concludes.