What should I consider when purchasing a property to let?

Since I had a similar question; I figured I'd ask in this thread.

Let's say, you have paid off your first property - bond is at R1 (Or whatever to keep it "open") Paid off in 5yrs because of lots of extra payments and additional monthly payments.

Would it be possible (and advisable) to use that bond to buy a second investment property - something around 50% of the original bond amount.

Putting aside for the moment about all the risks and @Neuk_ 's "why be a landlord" question... :p

Would that be the way to get a second investment property? Or are there better alternatives?
 
I asked that question myself in 2009, after paying off my primary property!

Talking to the bank, and to sars, they advised me not to mix my primary bond usage with secondary properties.

So in short, I went go another bind, my primary one is still open today after 12 years. Never ever close a bond!
 
Priapus said:
Since I had a similar question; I figured I'd ask in this thread.

Let's say, you have paid off your first property - bond is at R1 (Or whatever to keep it "open") Paid off in 5yrs because of lots of extra payments and additional monthly payments.

Would it be possible (and advisable) to use that bond to buy a second investment property - something around 50% of the original bond amount.

Putting aside for the moment about all the risks and @Neuk_ 's "why be a landlord" question...

Would that be the way to get a second investment property? Or are there better alternatives?
Click to expand...
I prefer a new bond on each property. I use the rent from the old one to pay it combined with the new possible rent.
 
Start small:

Primary bond paid off! Dont touch

Get a new bond!
Get a tenant (but still push your new bond).
If you double the payments... its paid off in 5 years.

Then regear and buy your 3rd with your 2nd bond

And it just snowball
 
zerocool2009 said:
Start small:

Primary bond paid off! Dont touch

Get a new bond!
Get a tenant (but still push your new bond).
If you double the payments... its paid off in 5 years.

Then regear and buy your 3rd with your 2nd bond

And it just snowball
Click to expand...
Pretty much where I was going.
Primary focus right now is to pay off my neons in 5yrs. I pay double each month on it.
Then get a 2nd property and match whatever the rental is to have that paid off in 5yrs. Then get a 3rd and repeat.

Not sure if this is the way to go yet. Busy doing as much research as I can.
With the original bond I assume I leave it “open” once paid?
 
NimblrFuture said:
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!
Click to expand...
buy a flat in Sea Point people always rent in that area
 
Priapus said:
Pretty much where I was going.
Primary focus right now is to pay off my neons in 5yrs. I pay double each month on it.
Then get a 2nd property and match whatever the rental is to have that paid off in 5yrs. Then get a 3rd and repeat.

Not sure if this is the way to go yet. Busy doing as much research as I can.
With the original bond I assume I leave it “open” once paid?
Click to expand...

Leave your primary bond open (you paid thousands in fees to get it, so just open it open).

This method worked for me ... I am now 11 years in !
 
Sinbad said:
Insurance!
Non paying tenants
Tenants wrecking the place
Etc
Click to expand...
Came here to say this
A friend of mine was letting out to a Nigerian family back in 2000 in Bloubergstrand
1st few months no problem, rent paid
Then suddenly nothing
And nothing following month
So she went to the house to go look what is happening because they weren't answering phone calls

Arrived at the house to find no one there, the place was stripped.
Every door was missing, windows taken out, light fixtures taken out, built in stove and oven gone, light switches removed, wall plugs removed. Taps, geyser, bathroom fittings.

You name it, all gone, well over a R100k of stuff to replace, and that was back then over 20 years ago.

I dont recall if insurance paid out or not, as there was no evidence of forced entry and theft, something like that. I don't remember.

That put me off for life ever buying property to rent out to tenants. If I had the bux I would rather buy a tiny office space that is specifically aimed at a certain target like a dentist, doctor, real estate agent etc. They generally keep the place looking nice and tidy and pay rent on time.

Just my 2 cents opinion :thumbsup:
 
I recommend it. It gives you something to do, but you must be hands on and handy and have plenty of contacts in the repairs and renovations field

Flats are easier to rent than houses
Make sure the BC is well run and the Managing Agent is efficient
The same applies to houses in that I always ask a lower than market rent, in order to retain a tenant
Fix things that go wrong as quickly as possible, preferably the same day
Keep on good terms with your tenant
If he is a moaner and always finding fault, suggest to him that you would prefer he leave
Do a credit check and make sure he has a good job and ask him to state he can afford the rent
Don't increase the rent unnecessarily and keep it below trends
Don't neglect maintenance, don't wait for something to break

I have 6 houses and 3 flats and a small factory unit. In 28 years I have really only had one bad tenant I had to throw out. He set the house on fire (poured thinners in the sink and threw in a match). I had him arrested and he got 6 years and was out in 3. The insurance paid for the repairs, it was over R1m and the house was much improved with new windows, new roof, paint job. I also had loss of profits so got paid for the 4 months it took to fix
 
My worst tenant at the moment is a toy importer who occupies a unit in Capricorn Park. He installed what he called a watchman on account of the bad security, although I fitted an adequate alarm which has never gone off in 3 years

This watchman has a whole family there, a big sob story, they are refugees from somewhere up north, pretend not to speak English. He got written notice that he has broken the terms of the lease by sub-letting (I found out he is charging these 8 people R5000 a month) so he has to vacate at the end of July.

He says business is bad, he has nowhere to go. If he is not out by 6.00am on Monday 2nd August, what is left behind will be seized and auctioned. My lawyer (a no-nonsense Jewish guy) has already served him notice. The door will be sealed and everyone evicted. The PIE act does not apply to illegal sub-lets

There are 2 vans, a small fork-lift truck where the battery was stolen and mountains of Chinese and Vietnamese plastic toys. There is a substantial deposit and I estimate R1m stock
 
Priapus said:
Since I had a similar question; I figured I'd ask in this thread.

Let's say, you have paid off your first property - bond is at R1 (Or whatever to keep it "open") Paid off in 5yrs because of lots of extra payments and additional monthly payments.

Would it be possible (and advisable) to use that bond to buy a second investment property - something around 50% of the original bond amount.

Putting aside for the moment about all the risks and @Neuk_ 's "why be a landlord" question... :p

Would that be the way to get a second investment property? Or are there better alternatives?
Click to expand...

It's a very valid question not meant to put anyone off, just get them to think about it and understand their obligations as a landlord, too many simply believe that they buy a rental property and collect the rent.
 
chrisc said:
My worst tenant at the moment is a toy importer who occupies a unit in Capricorn Park. He installed what he called a watchman on account of the bad security, although I fitted an adequate alarm which has never gone off in 3 years

This watchman has a whole family there, a big sob story, they are refugees from somewhere up north, pretend not to speak English. He got written notice that he has broken the terms of the lease by sub-letting (I found out he is charging these 8 people R5000 a month) so he has to vacate at the end of July.

He says business is bad, he has nowhere to go. If he is not out by 6.00am on Monday 2nd August, what is left behind will be seized and auctioned. My lawyer (a no-nonsense Jewish guy) has already served him notice. The door will be sealed and everyone evicted. The PIE act does not apply to illegal sub-lets

There are 2 vans, a small fork-lift truck where the battery was stolen and mountains of Chinese and Vietnamese plastic toys. There is a substantial deposit and I estimate R1m stock
Click to expand...
I wondered why Loot.co.za was not delivering. :ROFL:
 
NimblrFuture said:
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!
Click to expand...
Do this as well. Let us say you are looking at 1 Mil property. What do you expect as a rent? Check the area where you expect to buy property. Search Buy as well as Rent and you will probably see similar properties that are put of up for sale & available for rent (same complex I mean). See if your expectations match reality about rent. Calculate net rent that you expect to get after deducting levy/rates/water etc.

I am also looking and it looks like there is net return of no more than 6% (if that) in many areas of Johannesburg. Gross is about 11% of rental income. Obviously rent is high in areas of Sandton etc but property rates are also sky high if one has to buy it today.
 
Affieplaas said:
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.
Click to expand...
This. There is absolutely no other advantage other than the bolded part afaik.
 
Who else, back in the day, got their first bond, a long-term tenant and within months applied for a second bond? Back then investing in property was great....
 
rvZA said:
Who else, back in the day, got their first bond, a long-term tenant and within months applied for a second bond? Back then investing in property was great....
Click to expand...

It still is! The thing that counts against you is time. Tye longer you wait, the longer you are paying someone else’s bond
 
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