My first property - help needed.

[Radioboy]

Hi there Guys.

An oppertunity presented itself for me to buy my first property located in the east of Pretoria. Here are some details:

Price: R430 000
Revies applicable to the complex: R800 p/m.
Tenant currently pays R5500 p/m (Tenant will rent from me if i continue with the purchase)
Approx installemt : R3636 pm (9%, R20k dep, 20 years)
Approx insurance costs: R1000 p/m

With all the above, the rent income will cover the levies, insurance and installments.

I want to buy the property as an investement and to have a house to live in when i move back to Pretoria in about 12 months.

Now, i have a few questions if you dont mind.

1) during the process, how much time do i need to spend in Pretoria? Im currently living in the Easten Cape, so i cant just fly up there indefinitely. How much of this process can be done via email, fax or telephone?

2) the logical order of this process is: offer to purchase, loan, complete the deal. Right?

3) anything else i need to consider?

thanks you

 

[supersunbird]

Lucky you to be breaking even at start of renting.

What's the insurance for? Complexes building insurance is normally included in the levy...

 

[Radioboy]

Hey you.

Was wondering if you are gonna be the first one to respond. Right on time i see

Apart from nuclear fall-outs , God's wrath and riots - the insurance also doesn't cover fire. Go figure.

 

[satanboy]

Hey you.

Was wondering if you are gonna be the first one to respond. Right on time i see

Apart from nuclear fall-outs , God's wrath and riots - the insurance also doesn't cover fire. Go figure.

Then what is the point?

There is something wrong with R1k per month for building cover.

 

[Radioboy]

The insurance included in the levy doesn't cover fire damage. Thus for my account. I also thought that R1000 is a bit extreme.

 

[supersunbird]

Am I that predictable? lol

Are you 100% sure? Why would it not cover fire? Anyway, 1000pm is a whole lot for fire insurance and that means they calculate is a decent risk off fire, is it thatched roof or something?

There I know there was a fire at my rental place before I owned it and the insurance repaired it.

 

[naeem]

insurance figure seems a bit high? My folks place, a 3 bedroom house, double garage outbuilding, pool, etc etc - pay about R350/mo - building/geyser only, not contents.

 

[Radioboy]

Am I that predictable? lol

Are you 100% sure? Why would it not cover fire? Anyway, 1000pm is a whole lot for fire insurance and that means they calculate is a decent risk off fire, is it thatched roof or something?

There I know there was a fire at my rental place before I owned it and the insurance repaired it.

Hehe , well kinda. However, its not a bad thing.

Yes, positive. Its a steel roof but built on a mountain though. I don't know if that changes things.

I will double check the figure. Maybe my broker meant 'my premium will increase to R1000' or something like that.

 

[ToxicBunny]

Don't forget to factor in the tax when walking about an investment property...

 

[Beachless]

What about transfer fees?
Like the others said the insurance seems allot for structural insurance which is all you should need.

You dont have to be in the area but you will have to courier the documents which will cost a bit, best bet is to get the "all in" costs from the attorney up front including courier fees.

 

[SteveO]

Don't forget to factor in the tax when walking about an investment property...

This wont be much will it? Tax will only be on the income generated after all expenses etc?

Also, is there any benefit in setting up a trust for this sort of purchase?

 

[supersunbird]

He intends to rent it out for a year, not really an investment property

 

[ToxicBunny]

He intends to rent it out for a year, not really an investment property

Of course, but it can still change the calculations initially in terms of its profitability etc...

Also, I've seen a fair number of people buy a property with the intention of only renting it out for a year, and it very quickly becomes an "investment" property

 

[ToxicBunny]

I would also be wary about either the tenant or the deal, if you can buy the property and break even almost from day 1...

It does happen, but its somewhat rare at the moment.

Why is he not buying the property?

 

[Radioboy]

I would also be wary about either the tenant or the deal, if you can buy the property and break even almost from day 1...

It does happen, but its somewhat rare at the moment.

Why is he not buying the property?

The current tenant is a student, So he cant buy the property. The owner is in a bit of a financial mess, so he wants to get rid of the property. As far as i know, its a case of sell before the bank repossess it.

 

[HavocXphere]

Seems decent enough.

Just realize that we are at an all time low w/ interest rates. Can you still cover it if it shoots up 5%? Not that this is likely barring a major political event, but just in case.

 

[^^vampire^^]

Things to take into account:

* Insurance
* Levies
* Special Levies
* Water & Electricity (complexes conveniently don't include this in levies anymore which I found out the hard way)
* Rates & Taxes (this is now on the owner to get registered in their name and pay - body corporates are not allowed to manage this anymore.
* Income tax (you will have to pay income tax because it is investment property)

I bought a place in April thinking great, R4600 repayment and R600 for levies - no problem.
Bond: R4600 p/m
Levies: R600 p/m
Water & Elec: R600 p/m
Rates & Taxes: Not sure yet but sure alot.

Highly unlikely you will be breaking even on any investment property.

 

[supersunbird]

Things to take into account:

* Insurance
* Levies
* Special Levies
* Water & Electricity (complexes conveniently don't include this in levies anymore which I found out the hard way)
* Rates & Taxes (this is now on the owner to get registered in their name and pay - body corporates are not allowed to manage this anymore.
* Income tax (you will have to pay income tax because it is investment property)

I bought a place in April thinking great, R4600 repayment and R600 for levies - no problem.
Bond: R4600 p/m
Levies: R600 p/m
Water & Elec: R600 p/m
Rates & Taxes: Not sure yet but sure alot.

Highly unlikely you will be breaking even on any investment property.

Rates and taxes is ~R380 on a R620 000 valued property.

 

[^^vampire^^]

Rates and taxes is ~R380 on a R620 000 valued property.

Thanks Sunbird, still trying to get my property rates & taxes registered with the council, we all know how useful they are. My property is R619 000 so it should be R380 too, let's see how they try shaft me when they eventually get it right.

 

[ViperGTI]

I will double check the figure. Maybe my broker meant 'my premium will increase to R1000' or something like that.

I think that is probably it. Even on a property valued at over R1m, the annual insurance is like R5000 (if taken through the bank).