Property Investment Cape Town

Practical guide to residential property investment

guide-to-investing

As a first-time investor in property you need a detailed plan to help you stay on track and make the most of your investment. We’ve listed ten the most important actions you should add to your buy-to-let to do list.

10 Things first-time residential property investors must do

1. Set Financial goals

The first thing you as a residential investor must do is to set financially SMART goals. These goals must be SpecificMeasurableAttainableRelevant and Time-based. For example, how much income do you want to earn after costs and taxes, or how long will it take before you see a return on investment?

2. Determine your budget

Based on these goals, consider all the costs associated with your property investment and draw up a budget for the purchase as well as a cash flow plan for the ongoing management of the property.

3. Select your market

The primary rule in property investment is location, location, location. At this stage, it will be useful to find out from local estate agents what type of properties are most in demand, where the best locations are and what the purchase prices and typical monthly rent amounts will be. Once you’re armed with this information, identify your target location, property and tenant type, as well as the local amenities that will appeal to the market that you have identified – e.g. good schools, shops and transport infrastructure.

 4. Find the right property

Identify suitable estate agents to show you properties that have the rental to expense ratios that you have set as your goal. Evaluate the property critically to determine whether it will appeal to your selected target market. Look out for damp problems, insect infestations and other defects. Get a second, third and fourth opinion if you need them and remember to re-check your calculations to ensure you will meet your goals.

See Also: Flexibility in renting options on TheRoomLink

 5. Read the contract

Once you’ve found the right property, the estate agent will present to you with an offer to purchase. Carefully read this document with an attorney, as the terms are binding and you could be liable to pay for costs even if the transaction is not concluded in the end. The seller will need to accept your offer by signing the same document.

6. Finance the property

It is said that the second rule of property investment is “use other people’s money,” and unless you have a fat piggy bank you’ll need to secure a loan. Enlisting the help of a mortgage bond advisor is a healthy way to shop around for the best deal.

7. Wait it out

For a while, your hands will be tied as the banks and attorneys work on registering your mortgage bond and transferring the property to your name. Use this time to prepare for any improvements that you want to make to the property, and ensure you have cash available so that the process is not delayed due to unpaid costs.

8. Let the real work begin

Once you’re the official owner, you have to get the property in a marketable condition. Whether it needs a new coat of paint or added security features, now is the time to turn your new property into a good home for your future tenants.

9. Find a tenant

There are several things to consider when searching for your ideal tenant and because it is extremely difficult to evict non-paying renters under South African law, this step should never be rushed. Check suitable candidates’ credit score, ask for proof of income and sign a rock-solid contract with unambiguous rules.

10.  Monitor and maintain

Once your tenant has moved in, pay regular visits to your property to make sure it stays in tip-top condition. Never ignore late payments or non-payments, as these can quickly snowball into bad debt.

 

Once you have completed these ten steps, your bank balance should be looking healthier by the month and you might even consider investing in more property.

Source: Theroomlink.co.za