With current market conditions being so favourable to buyers, some South Africans might find themselves in the fortunate position to be able to purchase their first investment property. When deciding on investing in property for the first time, there are a few key elements that investors should take into consideration, such as whether they are investment-ready and well informed on all the available options.
"Purchasing a property is a major commitment that should be carefully evaluated regarding your life plans and financial situation both currently and in the future. As a first-time property investor, it is vital to be informed and ask the right questions, such as when, where, and why you should invest in property, "
explains Adrian Goslett, Regional Director and CEO of RE/MAX of Southern Africa.
The short answer to when investors should purchase property is as soon as he/she can afford to. According to Goslett, while it is important to watch the market and buy at the right time, it is never too early to get into the property market. “Property investors should assess whether they can afford to make the necessary financial commitments.
To accurately assess this, it is advisable to use the resources available, for example, banks and bond originators will be able to give purchasers estimated repayment figures based on bond requirements. Monthly bond repayments should not exceed more than 30% of the buyer’s total expenses, and it is advisable for buyers to put down a deposit of at least 10% of the purchase price of the property to make the repayments more affordable and increase the potential profit margin on your rental returns,” says Goslett.
He also reminds investors that it is not just the bond repayments that will need to be paid. There are other costs involved in a property transaction, including transfer duties, deed office fees and levies, municipal rates, bank charges, bond initiation fees, home insurance costs, the monthly administration fee charged by the bank, the cost of maintaining the property, and the rental agent’s fee should you choose to use one. It is essential to include these aspects into the calculation when assessing affordability.
Once you know that when you can afford to purchase, the next thing to decide is where to purchase. “Location is vital. Being in the right area and position will ensure a good resale value and return on your investment. When looking into an area, consider proximity to amenities such as schools and shopping centres. While online property search portals can be used to find statistics on areas and values of property, estate agents will be able to provide investors with a more accurate comparative market analysis, which will give investors a thorough and realistic knowledge of the property sales dynamics and rental returns of a certain area,” says Goslett.
This leads to the final point of why it is so beneficial to invest in property if one can afford to do so. “Property remains a solid asset class in which to invest. Buying property is a huge step towards financial security and growth and is a great way to invest in your future. It less volatile than the equity or share markets and, unlike other investment options, with property investors have complete control over their asset.
Property prices tend to increase fairly consistently over time, which makes it a lot easier to gauge the estimated return on investment much more accurately than any other investment class. If you are curious to know more about property investments, speak to your local real estate advisor to hear what returns you stand to make by investing in the current market,” Goslett concludes.
*Article sourced from Private Property*
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