Buying a property for investment purposes has grown in popularity over the years, mainly due to the increase of home-sharing and the growth of the rental economy.
Even though we are due for ongoing interest rate hikes, Wilmot Magopeni, franchisee for Leapfrog Sunshine Coast, says the buy-to-rent market is still a good one to get into if you wish to use property as an investment.
She offers these five tips for aspiring buy-to-let investors:
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1. Choose your location wisely
Location is one of the most important factors when purchasing an investment property.
“If you want to target students, you want a location close to universities. If you want to target workers, perhaps something close to the city would be best.”
Other things to consider when it comes to location, she says, would be how close the property is to public transport routes, what the closest shopping centres are, and if there is a high demand for rentals in the area.
“If you find a property in a good area that’s not in the best condition, consider negotiating the price of it and use the extra money to upgrade the space.”
2. Be realistic with your expectations
While Magopeni says there are many landlords who have made “a small fortune” by purchasing investment properties, this won’t be the case for everyone.
“The property market value isn’t growing at the rate that it once was, so manage your expectations before you make a final decision.”
The interest rate also impacts how much money – or rather profit, you make off rental every month after your bond payment is taken into account. It would be good to keep this in mind as we are due at least one more hike in the coming months.
3. Look outside of your comfort zone
Don’t only consider properties in the city in which you live.
“Perhaps you can’t afford an investment property in the heart of Cape Town, for example, but that doesn’t mean you can’t afford a property in a prime location in another city.”
4. Budget for upgrades
Even if you think you’ve bought the best property, Magopeni says you will more than likely find that it could still use an upgrade in some area.
“It might not be as big as a full-on renovation, but the property might need a fresh coat of paint, perhaps a new cupboard door, or even new taps and other hardware.
“This not only adds value to your investment, but it will also make you feel as though you’ve put some of your input into the place.”
5. Don’t take the first bond offer that comes your way
You should shop around before signing a bond as you might find a better deal elsewhere, she says, explaining that one offer might have better interest rates than the other.
“Consider working with a bond originator who will be able to handle this process on your behalf. They do all the bank negotiations and will be able to advise you on what the best offer on the table may be.”
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Buying a property whether, it is for investment or to live in, “is a massive step” and it can be life changing. Therefore, Magopeni says you should enjoy the process of shopping around and taking this step.
“Celebrate the wins, and once it’s all locked in, be grateful for the ability to invest in this manner.”
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