Property Investing in Student flats

Student flats - to buy or rent?

Wherever students end up studying, the main concern, after the exorbitant study fees paid to the learning institution, is where they should stay.

Williams says a major factor in deciding on a property would be to establish which location would be the most convenient for access to the campus.

This is according to Wendy Williams, one of the directors of Engel & Völkers Southern Africa, who says parents are usually comfortable with the idea of their child staying in the residential accommodation provided on campus at a relatively acceptable cost, but many students feel they are better suited to having their own student flat.

An important financial decision needs to be made by the parents – Can they afford to buy a student flat? Should they rather rent accommodation for the duration of their child’s studies? Or is there another alternative?

It certainly makes financial sense to, if at all possible, invest in your own property as opposed to renting for a few years, as you have nothing to show for this vast cash outlay afterwards. However, many considerations need to be made to validate your final decision.  An established and experienced real estate company will be able to advise you on the average rental per month, versus your investment in buying a suitable property.

Williams says a major factor in deciding on a property would be to establish which location would be the most convenient for access to the campus for your child, and then determine whether an investment in that particular area would be better than renting.

Should you decide to invest in a property, the two most important factors to consider are the location and price. Determine what you are able to afford before you even start looking for a suitable property.

Location should be determined by factors such as public transport, recreational facilities and, of course, security must always be factored in, so an outlying area is probably not a good choice. The distance of the property from the campus affects the price of the property as well, so make sure you are aware of this fact in the town you are buying in.

She says when determining your budget about whether to rent or to buy, remember to tally all the monthly living expenses, utility costs and transport expenses, and then rent or buy according to what you can afford. Add to this the monthly bond repayment costs if you are financing the property, and also factor in potential increases in bond repayments over the period that your children will be at varsity – there might also be increases in levies and municipal charges. You will then get a true reflection of the exact monthly costs of an owned property compared to a rented unit.

Williams says although you may have only one child, always remember that if you invest in a bigger apartment, you could rent out the additional bedrooms to other students, which will help pay off the monthly bond and cover other expenses.

There are always thousands of students each year looking for rental accommodation, so if your property is in a well situated and safe environment, you will always find tenants.

According to Johan Swart, tax manager at Legal and Tax, now is the right time to get into the property market. A simple example would be the purchase of a R1 million property, generating 8 000 rental income per month, which means that your return on the investment is 9.6 percent per year. What’s more, the property itself could be worth in excess of R1.2 million in two years’ time, which translates into a capital growth of 20 percent.

When buying an apartment, note that the smaller units appreciate the fastest in value, and also earn the best rental income in relation to the capital outlay. For example, two R1 million units will probably give a better return than one priced at R2 million. With one unit, the risk is focused and concentrated on a single tenant, but spreading one’s risk between more than one property is one of the oldest and wisest investment strategies, and has always been favoured by landlords, says Swart.

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