Home Ownership

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DrewChan

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Does anyone here buy to rent? I have been looking at a few options on gumtree in the R450k - R500k range. Units that will probably fetch around R3500 rental.

How much extra should be set aside besides house insurance/rates/water/electricity.

I'm sure there are additional costs - just trying to find ballparks
 
Go for a R1000 per month in maintenance costs over and above all the others, and you might be relatively safe... also factor in Tax, because if you're buying to let you owe the taxman.
 
It depends largely on the type of property. In that price range you're probably talking about sectional title, a flat or something. If you own a sectional title property you don't pay for insurance directly, you just pay a monthly levy to the body corporate. Some developments also include water in the levy, so you'd have to check with the specific complex for details. Don't just trust the estate agent either - they'll tell you any nonsense just to make a sale.
 
Is buying to rent still a possibility - thats the general plan - buy for R450k - rent for R4k - I'm trying to find expense to me-

Also thinking about rental agencies - apparently they can ensure rent even if tenant doesn't pay etc etc.
 
DrewChan said:
Is buying to rent still a possibility - thats the general plan - buy for R450k - rent for R4k - I'm trying to find expense to me-

Also thinking about rental agencies - apparently they can ensure rent even if tenant doesn't pay etc etc.
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Buying to rent is still a possibility, but you will be short of your bond + costs for at least 4 years i would guess.

As for rental agencies ensuring rent even if the tenant doesn't pay.. good luck finding that agency...
 
Obviously factor in the interest you lose on the money you splash for the bond too
 
Costs can add up and it will generally be a good number of years before you start turning a profit from the rent.

Levy, rates, rental agency cut, garden service, maintenance, structural insurance, legal fees (possible costs off the top of my head)
 
Also interested in this.. @ToxixBunny, what do you mean when you say short? Haven't had my coffee yet :o
 
Pho3nix said:
Also interested in this.. @ToxixBunny, what do you mean when you say short? Haven't had my coffee yet :o
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Short as in not quite enough...

Bond on R500k is R4k (assumption), plus R750 levies, plus R350 rates, plus R1000 maintenance... that is R6100pm, but you can only rent out for R3500, maybe R4000.
 
DrewChan said:
Is buying to rent still a possibility - thats the general plan - buy for R450k - rent for R4k - I'm trying to find expense to me-

Also thinking about rental agencies - apparently they can ensure rent even if tenant doesn't pay etc etc.
Click to expand...

You personally will get a tax bill from the municipality based on the properties valuation by them. The levy might include to water. My levy includes the water. The electricity is paid by the tenant to the municipality.

You will pay a levy that can vary greatly depdending on the sectional title.. The rental unit is facebrick, so no special levy for painting every few years. We've had one special levy in the past 5 years, for security upgrading. That was like R2000 extra for 3 months.

You will need to increase you rent annually because at R450 000 you bond payment would likely be R4000 to R4500 depending on interest rate. So renting for R4000 will/might just cover bond at first and not levy or taxes and rates or maintanance.
 
ToxicBunny said:
Short as in not quite enough...

Bond on R500k is R4k (assumption), plus R750 levies, plus R350 rates, plus R1000 maintenance... that is R6100pm, but you can only rent out for R3500, maybe R4000.
Click to expand...

Jip, I will break even in about another 2 years, that is about 7 years overall (had biggish increases in levy or I'd be having no shortfall now). But in another 5 years the property will be payed off and minus levy and property tax and SARS tax all will be income. And I got the place for a great price. So if i have to sell it will make a profit minus the money spend on the "short" I had to cover, the rent I have recieved covers the bond payments.
 
ToxicBunny said:
Short as in not quite enough...

Bond on R500k is R4k (assumption), plus R750 levies, plus R350 rates, plus R1000 maintenance... that is R6100pm, but you can only rent out for R3500, maybe R4000.
Click to expand...

That's still workable. Meaning on a 500k house, you pay R2.1k and if you add the R1.9k to push it to R4000(which you would pay if you were paying the bond yourself), you reduce the loan term.
Anyone currently doing this and seeing it as a great investment? Don't wanna create another thread on the subject
 
Yeah its entirely workable, but alot of people assume you can buy a property, and rent it out for what you are paying for the property.. and for the first 5 years (give or take), that is just not possible.
 
Oh and they don't ever manage as they only budgeted for the loan repayment amount. I see :)
When you are renting, how much money in reserve should be kept for incase I don't get a tenant or the tenant doesn't pay?
 
Pho3nix said:
Oh and they don't ever manage as they only budgeted for the loan repayment amount. I see :)
When you are renting, how much money in reserve should be kept for incase I don't get a tenant or the tenant doesn't pay?
Click to expand...

At least 2 months rent in my opinion....
 
Pho3nix said:
Oh and they don't ever manage as they only budgeted for the loan repayment amount. I see :)
When you are renting, how much money in reserve should be kept for incase I don't get a tenant or the tenant doesn't pay?
Click to expand...

Three months rent + 20 - 30k in immediately accessible cash for any emergency repairs.
 
There are several tips and tricks doing this. Depending on where you stay you can have several options.

If you are close to a university / big working place. You can make a commune and rent out per room. This has the advantage that you always have at least some income. This is also very profitable as you can ask about 2.5k - 3k per room.

Otherwise rent out the entire house to a family. If they move out you can be without rent for quite awhile. Also you get good renters (which are very few) and horrendous renters that break everything (most common).
 
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