Sell or rent out apartment

Splinter

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I've got a 1 bedroom apartment which I've recently renovated. I'm not sure whether to rent it out or sell. Would be keen to hear your thoughts based on the current property and economic climate.

Ok, so we need to get specifics. What area and what price did you pay?

You recently renovated it you say. I take it you were living there before, and now aim to rent it out for the first time.
 

Splinter

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Do your calculation. I have a flat bought it for 200k in 2001, can sell it now for 850k. I rebonded it a couple of years ago and now owe the bank 250k. So if I sell my profit will be ~ 600k, minus CGT which will be ~ 100k which leave me with ~ 250k in my pocket. At them moment the bond and levy is covered by the rental, will hang on for while longer.

The biggest thing with renting is to make sure you have a good tenant.
Firstly - what is your rental? and associated levies.?

Secondly, 600 minus 100 = R500k profit.
 
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Gozado

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Another factor is: who might be on your mental list of people whom you feel you want to help and of whom you can anticipate that they might need you (e.g. parents, adult children, siblings, best friends)? Try to decide whether this flat might be a suitable residence for them, at some point. If, indeed, you have anyone on such a list, would having this flat make it easier on you, to support them, or not?
 

Splinter

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Lets put this in perspective. I too purchased a flat in 2000. For R205 000. It's now worth about R1.2m. I get more than R8000pm rental on it now. I will be honest, rentals got hit in the last year or two.

But - it's consistent income. That normally grows over and above inflation. And that excludes the capital growth.
 
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Splinter

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Lets put this in perspective. I too purchased a flat in 2000. For R205 000. It's now worth about R1.2m. I get more than R8000pm rental on it now. I will be honest, rentals got hit in the last year or two.

But - it's consistent income. That normally grows over and above inflation. And that excluded the capital growth.

Oh yes - another thing to consider when people talk about 8% returns on products like Allan Gray etc - those are internal returns. As in they are a growth in your investment product internally, but they are not being distributed to you directly at the present time. Should you withdraw this 8% pa, your investment will likely go backwards.

MY R8k a month cash received in rental - I could, if I wanted to, pay it into (say) an Alan Gray product.

I hope you get this.

I'm not saying do not invest in the market - actually the complete opposite. But a solid property or two are an amazing foundation to create wealth.
 

Mike Hoxbig

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Lets put this in perspective. I too purchased a flat in 2000. For R205 000. It's now worth about R1.2m. I get more than R8000pm rental on it now. I will be honest, rentals got hit in the last year or two.

But - it's consistent income. That normally grows over and above inflation. And that excluded the capital growth.
I don't think it's been mentioned whether the property is paid off, or close to it. That's a big factor, and wouldn't be worth selling if it is.

Very few investments will give you the same level of return over time. And if the rand declines, so do your investments, but not your rental income.

Even if the property is bonded, the rental income should eventually outweigh the bond repayment as per your example.

If you're in a position to rent it out, and don't require the capital from selling (for example as a deposit forwards the next place), it doesn't make sense to sell...
 

airborne

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The flat is in Jhb North.

So the seller is liable for agent fees but it can be factored into the asking price.

Yes the rental laws do not inspire much confidence for the landlord right now. Of course, it depends on the quality of tenant but that is a bit of a hit and miss.

Going to put some feelers out there to see if I can get my asking price. Will still consider rental if nothing pans out.

BBSA's method is a form of negotiating the comms, it is pretty clever because it forces the agent to be motivated to sell at a higher price, unlike if you don't have that kind of agreement in place the agent will happily push for a sale at any price because they know their comms are guaranteed. Agents are often scaly and manipulatve so it's good way to reign that behaviour in and force them to put some long yards in for their pay check.
 

rvZA

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Sell.

The SA economy is in shambles. If you get a tenant moving in and he or she loses their jobs and stops paying and refuse to move, be sure that you have at least R100k stashed away for legal costs in getting a court order to get them out. Afterwards you write off all your losses, because if they could not afford rent, they will never be in a position to repay the money, even if the court orders them to do so.
 

Splinter

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Sell.

The SA economy is in shambles. If you get a tenant moving in and he or she loses their jobs and stops paying and refuse to move, be sure that you have at least R100k stashed away for legal costs in getting a court order to get them out. Afterwards you write off all your losses, because if they could not afford rent, they will never be in a position to repay the money, even if the court orders them to do so.

How many properties do you own?

It's all about vetting your tenants beforehand. And it's no-where near R100k. It's more the time that it might take.

And also just letting them know beforehand that shyte like this will not be acceptable.
 

Tman*

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The flat is in Jhb North.

So the seller is liable for agent fees but it can be factored into the asking price.

Yes the rental laws do not inspire much confidence for the landlord right now. Of course, it depends on the quality of tenant but that is a bit of a hit and miss.

Going to put some feelers out there to see if I can get my asking price. Will still consider rental if nothing pans out.
I have 2 flats in jhb north. As others have mentioned tenancy selection is key. Ive never had a bad experience with non payment.i can however comment that my rentals reduced by 20% over the last 12 months tho
 

GrootVoet

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Firstly - what is your rental? and associated levies.?

Secondly, 600 minus 100 = R500k profit.
1. Income R5500 (Can more but I do this to keep my tenant), Levy R800, Property tax R200, Bond R3200.

2. R500K profit minus outstanding Bond R250K = R250K

I don't mind not making a big profit because I'm not dependent on this income.
 

rvZA

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How many properties do you own?

It's all about vetting your tenants beforehand. And it's no-where near R100k. It's more the time that it might take.

And also just letting them know beforehand that shyte like this will not be acceptable.

Lol, clearly you have never been renting out a property nor had to approach attorneys and courts to assist you with an order. And, by the way, as if any tenant will care about what you think is acceptable... laughable at best.
 

Mike Hoxbig

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1. Income R5500 (Can more but I do this to keep my tenant), Levy R800, Property tax R200, Bond R3200.

2. R500K profit minus outstanding Bond R250K = R250K

I don't mind not making a big profit because I'm not dependent on this income.
1. R1,300 income p.m.

2. R1,000-odd in interest p.m. if you had to invest R250k at 5%.

Scenario 1 - you get the income and a paid off property when the bond is settled, the value of which increases itself over time. You then have pure passive income, which enables you to buy another property and pay it off sooner. And so on, until you can theoretically start buying them cash.

Scenario 2 - you're relying on compound interest off a relatively low capital amount. In 20 years time your 250k is worth around 650k which is barely keeping up with inflation.

Just do the maths. Only one of these scenarios enables you to start building wealth. I'll leave it up to you to guess which one.

Edit: and don't listen to dumbass EWC fear-mongerers...
 
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Splinter

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1. Income R5500 (Can more but I do this to keep my tenant), Levy R800, Property tax R200, Bond R3200.

2. R500K profit minus outstanding Bond R250K = R250K

I don't mind not making a big profit because I'm not dependent on this income.

You keep on changing numbers, in a very strange way.
 

Splinter

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Lol, clearly you have never been renting out a property nor had to approach attorneys and courts to assist you with an order. And, by the way, as if any tenant will care about what you think is acceptable... laughable at best.

It seems you are just trolling for a reaction. Read above, you troll, where I clearly state I have been renting out a property.
 

Splinter

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1. Income R5500 (Can more but I do this to keep my tenant), Levy R800, Property tax R200, Bond R3200.

2. R500K profit minus outstanding Bond R250K = R250K

I don't mind not making a big profit because I'm not dependent on this income.

You are obviously talking the biggest load of BS :)
 

rvZA

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It seems you are just trolling for a reaction. Read above, you troll, where I clearly state I have been renting out a property.

And this makes you an expert :ROFL: You clearly have been lucky this far. There are thousands of people on the Facebook group, LegalTalk who would set you straight. There are many who lost their premises due to non paying tenants and banks ending up repossessing the properties.

“Fees range from R6 000 to R25 000 for an unopposed eviction, and up to R100 000 depending on the court, the province in which it is launched and whether or not it is opposed,” he says, noting that these costs will come out of the landlord’s pocket, though they can be passed on to the tenant.”


To any real person out there renting out a premises, this is the funds you will need to have access to when you get a tenant who refuse to leave.
 

Mike Hoxbig

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And this makes you an expert :ROFL: You clearly have been lucky this far. There are thousands of people on the Facebook group, LegalTalk who would set you straight. There are many who lost their premises due to non paying tenants and banks ending up repossessing the properties.




To any real person out there renting out a premises, this is the funds you will need to have access to when you get a tenant who refuse to leave.
The answer is in the very article you linked to.

There are various insurance products to protect you from non payment as well as cover litigation costs.

Additionally any bad tenant will find themselves listed on various delinquent tenant databases, in addition to basically trashing their credit record. They will never be able to rent, or secure credit, should anyone dig into their background, which means they're basically stuck with schitty places or schitty landlords or both.

The key is to do a thorough background check against these databases, their affordability criteria, credit record etc. That's where a decent agent comes in and handles the screening process and ongoing admin for you.

You may be tempted to save the 10% fee and handle it yourself, but it's one of the few cases where a decent agent is actually worth it...
 

rvZA

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The answer is in the very article you linked to.

There are various insurance products to protect you from non payment as well as cover litigation costs.

Additionally any bad tenant will find themselves listed on various delinquent tenant databases, in addition to basically trashing their credit record. They will never be able to rent, or secure credit, should anyone dig into their background, which means they're basically stuck with schitty places or schitty landlords or both.

The key is to do a thorough background check against these databases, their affordability criteria, credit record etc. That's where a decent agent comes in and handles the screening process and ongoing admin for you.

You may be tempted to save the 10% fee and handle it yourself, but it's one of the few cases where a decent agent is actually worth it...

It is indeed. But I mentioned this because very few people do have any of rhese insurance products. Also, for the biggest part you are not always covered in full. There will always be fees you will need to pay. Litigation is expensive.

Also you may need to look at your agreement with the agency to see what happens when litigation is requiree. Who will be responsible for what.
 
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