Buy to let investment

[marco79]

We are looking at buying a flat in the region of R300k to R350k with the intension of renting it out long term. I'm only 33 and my wife 30. We are only looking at purchasing the property closer to the end of the year. We are looking in the Northern Suburbs of Cape Town, preferably a 2 bedroom unit which could be rented out between R2.5k and R3k per month.

One of the reasons for this is that one of my colleagues who is now 60, has 2 properties that he is renting out for R20k per month. He hasn't touched his retirement savings yet.

Would this be a good idea? Or should we rather just put the R3k per month into a RA or a unit trust? At the moment we don't have much in retirement savings.

 

[azbob]

Do you get 2 bedrooms for that price? You'd be hard pressed to find a 1 bedroom for very much under 400K

 

[biometrics]

That's not a lot of money in Cape Town. What are you going to get for that? Will that area allow growth over the years. What quality tenants will you get?

 

[marco79]

That's why I'm going to take my time researching this option. There is a new block of flats in Brackenfel with 2 bedroom flats with built in kitchens for about R350k to R420k IIRC, with rentals in the region of R3.5k per month.

 

[ToxicBunny]

That's why I'm going to take my time researching this option. There is a new block of flats in Brackenfel with 2 bedroom flats with built in kitchens for about R350k to R420k IIRC, with rentals in the region of R3.5k per month.

Something tells me an important bit of info is missing from that equation..

at R350k your bond repayments are lower than the rental you will get so you will almost instantly be in a good position. Buy to Let usually takes 3 - 5 years (if its a new build) before the rental matches the bond repayments (let alone the rates and levy)

 

[marco79]

We won't mind putting an additional R1000 per month into the bond to cover things like levies, rates, rental agent fees, etc.

 

[biometrics]

We won't mind putting an additional R1000 per month into the bond to cover things like levies, rates, rental agent fees, etc.

Include unexpected maintenance, tenants not paying on time or at all. It's not always pretty.

 

[ToxicBunny]

We won't mind putting an additional R1000 per month into the bond to cover things like levies, rates, rental agent fees, etc.

You're missing my point...

The cost or the rental amount for the property you're thinking about MUST be wrong... If all I had to cover were levies/rates and fees... then I would be buying up large swathes of that property TOMORROW...

for the first 3-5 years... your rental amount should be lower than your actual bond costs (without taking into account levies/rates/fees)

 

[marco79]

That's why we want to start off investing in something affordable if we run into those problems.

 

[biometrics]

That's why we want to start off investing in something affordable if we run into those problems.

So you're likely to get financially stressed tenants, which increases your risks.

Playing landlord is not fun. I've tried it with a house and a flat. The house an agency dealt with the tenants but they didn't pay the last two months of the lease and the deposit covered one so I lost a month (they also removed the spice rack from the wall when they left, bastards!). The flat I let on short term rental (it was fully furnished) and that was too much effort.

 

[marco79]

I could have been mistaken but it should be in the region of R3000 per month.

I will be getting feedback from 2 agents for 2 different developments tomorrow.

The rental for this huge development close to me in Blue Downs are R3000 per month for a 2 bedroom flat which is much smaller than than Brackenfel ones which is in a better location. There flats are going for R329k but are much smaller and have almost no kitchens.

 

[ToxicBunny]

The agents are lying to you SOMEHOW...

R329k development, will have a bond (at prime over 25years) of R2760 per month.

I have yet to come across property where the rate of the bond is lower than the rent from month 1.

 

[marco79]

The agents are lying to you SOMEHOW...

R329k development, will have a bond (at prime over 25years) of R2760 per month.

I have yet to come across property where the rate of the bond is lower than the rent from month 1.

I will do some research in this regard.

 

[HavocXphere]

I will do some research in this regard.

Do that. I'm inclined to agree with TB on this though. Those numbers don't line up....not even a little bit...so tread mighty cautiously.

 

[Stefanmuller]

I could have been mistaken but it should be in the region of R3000 per month.

I will be getting feedback from 2 agents for 2 different developments tomorrow.

The rental for this huge development close to me in Blue Downs are R3000 per month for a 2 bedroom flat which is much smaller than than Brackenfel ones which is in a better location. There flats are going for R329k but are much smaller and have almost no kitchens.

Not sure if it is still the case, but about 5 years back two people I met, young CA's, both bought there bedroom houses in either Eersterivier or Elsiesrivier. They said their shortfall on the bond is lowest there because for the same price you pay for a flat in Brackenfell, you get a three bed house or more, and rent is quite high in those areas because people there have a rent culture. They want big houses and cars but rent rather than buy. Not sure this is true?

 

[marco79]

Not sure if it is still the case, but about 5 years back two people I met, young CA's, both bought there bedroom houses in either Eersterivier or Elsiesrivier. They said their shortfall on the bond is lowest there because for the same price you pay for a flat in Brackenfell, you get a three bed house or more, and rent is quite high in those areas because people there have a rent culture. They want big houses and cars but rent rather than buy. Not sure this is true?

I am not sure about the reason for the people renting but I do know of the development that they are talking about. Prices were just under R400k and these were rented out at R3500 per month. Those same houses are now on sale for between R470k and R490k.

 

[ToxicBunny]

You honestly need to point me in the direction of this place...

Mainly because if I can buy property and cover the bond from month 1, it makes it a damn damn damn good investment from my point of view.

 

[DJ...]

You honestly need to point me in the direction of this place...

Mainly because if I can buy property and cover the bond from month 1, it makes it a damn damn damn good investment from my point of view.

Actually the developers would be buying the property themselves. Nothing makes sense here...

 

[Alton Turner Blackwood]

The agents are lying to you SOMEHOW...

R329k development, will have a bond (at prime over 25years) of R2760 per month.

I have yet to come across property where the rate of the bond is lower than the rent from month 1.

He's not lying, I stay in Blue Downs as well. There's quite a few developments taking place in Blue Downs and Kuilsriver/Blackheath. A friend of mine moved into a complex (opposite the courts there) and paid around 390k for a two bedroom place - I kid you not)

I will do some research in this regard.

Out of curiosity, where do you stay?

You honestly need to point me in the direction of this place...

Mainly because if I can buy property and cover the bond from month 1, it makes it a damn damn damn good investment from my point of view.

I have to drive past one of these places daily, I'll see if I can get the developer's details and price for you.

 

[DJ...]

Well then the developers are morons, or whoever is bankrolling this venture are...