Property can be a great investment but it’s easy for investors to make mistakes when they’re just starting out, which can have a considerable impact on their portfolio. Here are some of the most common errors to avoid when you’re looking for a rental property to invest in.
- Not researching the rental yield thoroughly: Many people simply take the word of the estate agent on what rent they can expect from a property. Instead, investigate similar rental properties in the area to come up with a more accurate figure. The last thing you want is to end up with a low rental yield, low capital growth property that simply won’t deliver – or even cover your costs.
- Choosing a property based on your personal tastes: While it’s important that you do like the property you are looking at, it is far more important that it is attractive to quality tenants in the market that you are targeting. For example, if you are looking to rent to a family then qualities like good security, good schools in the area, enough bedrooms and a decent-size garden are more important than great views and trendy lifestyle factors that appeal more to singles.
- Maintenance and monthly costs: To make the most of your investment property, you need to maximize the rental income and capital growth while minimizing your need to spend money on maintenance and upgrades. This needs to be weighed up for each property you look at as the costs will differ. For example, low maintenance complexes and clusters are usually a solid deal but remember that you will be responsible for the levy. A free-standing house won’t have a levy, but maintenance costs for security, gardens and the building itself can be much higher than anticipated.
- Deciding on a property too quickly: Don’t choose the first property you see – instead, spend plenty of time looking at different properties in different areas and getting to know what the costs and returns will be. Take a look at flats, apartments, complexes and clusters as well as free-standing homes in different neighbourhoods to see where the best value and returns are. Just because someone tells you that a property is a great investment that will be sold quickly doesn’t mean that it is.
- Not realising all the costs involved: The purchase price is only one of the costs involved in buying a property, so it’s important to thoroughly investigate all the initial and ongoing costs of this investment to see if you can afford it. Some additional purchase costs include transfer duty and legal fees, and necessary upgrades to the property. Ongoing costs will differ from property to property but can include levies, rates and taxes, repairs and maintenance.
With the right research and planning, property investment is a great way to diversify your portfolio in South Africa.
Jason Scholtz is the CEO at Envision Investments and a leader in the property and strategic investments industry in South Africa. For more investor tips and an insider’s look into the South African market, be sure to get in touch, keep an eye on this blog or visit http://www.envisioninvestments.co.za/