What should I consider when purchasing a property to let?

NimblrFuture

Member
Joined
Jan 24, 2021
Messages
23
Hi all

I am looking to buy an investment property to let in CT and I was wondering what are the different considerations for a prospective investor?
Besides rent yield and capital appreciation, what are the other important considerations?

Thank you in advance!
 

Affieplaas

Well-Known Member
Joined
Jan 12, 2020
Messages
151
Residential or business property?

SA property capital growth has been basically flat for the past 10 years and will most likely be the same for the foreseeable future. Unless you buy property in a current run down area for next to nothing and said area is thereafter rejuvenated to become the next Sandton, don't count to much on capital appreciation.

Then rental returns in SA as percentage of cost of the property in SA is also less than 5%. That is before expenses such as municipal rates and taxes, maintenance etc.

Anyway, the articles below should give you all the answers you are looking for:


 

zerocool2009

Executive Member
Joined
Sep 4, 2009
Messages
5,614
Before I buy more property, I always ask myself this : If it stands empty for 12 to 24 months, can I still afford it :)

Residential is easier than commercial. Do things yourself, why pay someone for taking 10% who just calls you with issues. Alot of guys always see the bad (con's), but there are pro's too.

The biggest thing for alot of people : TIME. If you don't have time, don't do it.

Nothing just falls on your lap (be pro-active and make it your hobby)
 
Last edited:

Barbarian Conan

Expert Member
Joined
Aug 8, 2017
Messages
2,998
I had a rental property for about 8 years in the Jhb area. Rough calcs put the growth of any funds I put into it at about 10% after I sold it.

Before doing your calcs, decide whether you want to use a rental agent, and find out what they charge. I ended up not using one, as the ones I tried were useless. My ad in Private Property did in 2 days what they couldn't do in 2 months.
 

NimblrFuture

Member
Joined
Jan 24, 2021
Messages
23
Residential or business property?

SA property capital growth has been basically flat for the past 10 years and will most likely be the same for the foreseeable future. Unless you buy property in a current run down area for next to nothing and said area is thereafter rejuvenated to become the next Sandton, don't count to much on capital appreciation.

Then rental returns in SA as percentage of cost of the property in SA is also less than 5%. That is before expenses such as municipal rates and taxes, maintenance etc.

Anyway, the articles below should give you all the answers you are looking for:


I'm looking mainly for residential property, and would ideally like the property to pay itself off in the long run but not sure what indicators will indicate this for me
 

NimblrFuture

Member
Joined
Jan 24, 2021
Messages
23
Before I buy more property, I always ask myself this : If it stands empty for 12 to 24 months, can I still afford it :)

Residential is easier than commercial. Do things yourself, why pay someone for taking 10% who just calls you with issues. Alot of guys always see the bad (con's), but there are pro's too.

The biggest thing for alot of people : TIME. If you don't have time, don't do it.

Nothing just falls on your lap (be pro-active and make it your hobby)
I understand that rent void is a massive risk for real estate investors - is there a specific way that you estimate this probability for each property you're prospecting?

In terms on time required for investing, to what extent can one reduce this by hiring a property manager who handles all the issues related to the investment?
 

saturnz

Honorary Master
Joined
May 3, 2005
Messages
15,307
What exactly are the financial advantages of a bond? I'm just aware of the leveraging benefit of a bond.

the leveraging aspect is the biggest, you are not going to make reasonable returns from a rental property any other way

but the other part to the equation is the tax advantages, many landlords ran (maybe still do) run tax losses, but SARS has squeezed the lemon here too
 

Affieplaas

Well-Known Member
Joined
Jan 12, 2020
Messages
151
What exactly are the financial advantages of a bond? I'm just aware of the leveraging benefit of a bond.

The only real advantage is the fact that you can deduct the interest paid on the bond from your rental income.

On the flip side, if you finance a R1m property over 20 years at 10% interest you will pay R1,316,000 in interest so the property would have cost you R2,316,000.
 

saturnz

Honorary Master
Joined
May 3, 2005
Messages
15,307
The only real advantage is the fact that you can deduct the interest paid on the bond from your rental income.

On the flip side, if you finance a R1m property over 20 years at 10% interest you will pay R1,316,000 in interest so the property would have cost you R2,316,000.

no the property would not cost R2.3m to the owner, you have to deduct the rental payments
 

neoprema

Expert Member
Joined
Jan 12, 2016
Messages
4,395
Considering running a million miles away and don't come back!

Biggest nightmare of my life was renting our property. And I've had some pretty bad nightmares..
 

Affieplaas

Well-Known Member
Joined
Jan 12, 2020
Messages
151
no the property would not cost R2.3m to the owner, you have to deduct the rental payments
Well that is what you would have paid to the bank.

You can calculate the actual cost of the property any way you like. Just remember that if you want to deduct the rental earnings, you must also add the rates and taxes, maintenance and other costs to get an accurate view. That is in addition to the bond registration cost, transfer duties and legal fees.
 

RedViking

Nord of the South
Joined
Feb 23, 2012
Messages
34,699
Read this thread. All of it. :
 

saturnz

Honorary Master
Joined
May 3, 2005
Messages
15,307
Well that is what you would have paid to the bank.

You can calculate the actual cost of the property any way you like. Just remember that if you want to deduct the rental earnings, you must also add the rates and taxes, maintenance and other costs to get an accurate view. That is in addition to the bond registration cost, transfer duties and legal fees.

yes, sure, I did this calculation on a speadsheet a few years ago on this forum, return on actual investment (like your own money) came to 900% over 20 years
 
Top