How to make investment property work for you
All things considered, property remains a reliable choice of investment if you’re willing to play the long game. Despite the South African economy not being in the best way, one only needs to look at new developments in Cape Town and Johannesburg for reassurance that the tides are turning, albeit slowly.
“Now is a great time to invest in property, thanks to the negative real property price growth that makes it a buyer’s market,” says Steven van Rooyen, Principal at Leapfrog Milnerton.
Van Rooyen shares an anecdote of an ardent property investor who says the reason property is his investment vehicle of choice is because it’s tangible. “It’s one of the only forms of investment where I can physically touch my money,” the investor is renowned for saying.
And yes, property is a tangible investment but one also needs to be careful to assume that the property as a mere building is where your fortune lies. “Property can be a wonderful investment, provided you approach it with clarity, caution and an open-mind,” Van Rooyen believes.
He highlights the points would-be property investors should pay careful attention to.
Be clear on your goals
It’s important to know what exactly you want the property to do for you: Are you looking for fast capital growth or are you in it for the long-term with a ‘slow-but-steady-wins-the-race’ mentality? The goal is likely to impact many of the decisions you make around this investment so taking the time to ensure you’re absolutely clear on your needs and expectations is very useful.
Patience is the ultimate virtue when it comes to property investments. “It takes time to build a robust property portfolio, or even just get to the point where your buy-to-let property brings in significant income if it is bonded from the start,” Van Rooyen explains. Long-term strategy and planning is crucial and the best is generally to avoid selling, even if it is to fund another buy-to-let property as the legal fees and taxes can set you back rather substantially.
Work with a professional
Most people wouldn’t cut their own hair, service their own car, or do their own surgical knee replacement, unless of course they are suitably qualified (and even then, they might not!). The point is, if you’re looking for the best results, ensure you work with a trusted property advisor to guide you through the complexity of the property purchasing or selling transaction.
“Property advisors can advise you on everything from the types of investment properties with the highest rental yield to the expected growth in a particular area, to helping you negotiate the best deal on a bond, and plenty more. Property advisors are property professionals and there to make your property experience easier and more efficient,” Van Rooyen says.
Money money money
The goal might be for the property to make money for you, but you need to also be very aware of what the property is going to cost you to begin with. “Start by asking your bank for pre-approval of your investment loan as this will give you a good indication of the types of properties to look for,” Van Rooyen advises. Also think about things like maintenance costs, levies and taxes, as well as the difference between the monthly rental yield and the bond cost.
Also pay attention to the following:
Buy in a growth area: Buying in an area where there is sufficient demand for rental properties just makes sense if you’re buying to let.
Opt for practicality over luxury: A rental property only needs to be neat and in working order. Forget the bells and whistles – you want to make money, not spend money.
Use your head, not your heart: A buy-to-let property is not one that you need to have any emotional attachment to. It is simply the vehicle through which you are going to make money. Work with a trusted property advisor to make rational decisions that can lead to long-term benefits.
Whether it’s your first or your fifth investment property, and it remains a big deal, and a transaction that needs to be entered into with clarity and an eye on the future.