Whenever I tell people about my big dream for 2018, I am met with wide eyes and suspicious looks: “Next year I’m going to buy my first house. Not to live in, but to let, so that I can take my first step towards an additional income stream within the property space. I can put some extra cash towards the payments and before I know it I can buy my second property.” Regardless of the reaction my dream awakens in other people, I’m starting to do my homework now.
So why the wide eyes? According to a MoneyWeb article that released in 2016, the residential property market has declined by 20% since 2008. During the last property boom, between 2002 to 2008, almost 25% of all South African property sales were in the “Buy to Let” (BTL) category. This has now declined to around 6%. Apart from the overall negative look towards property, in general, the writer goes on to provide stats and insights on renters. The conclusion is that I, or any other BTL property owner, will have a 30% chance of late or non-payments. Yes, this could be very worrying and should indeed let me think twice about BTL.
Throwing a spanner in the works, this is precisely where the dream of BTL was born for me. Having an excellent rental guarantee and making sure that all the legal paperwork is in order shields one against the late or non-payments. The Preferental Promise includes rental payments on the first of every month, regardless of my renter’s paying habits, and it covers all my legal costs should we have to go through an eviction process. Furthermore, they provide a substantial lease agreement, drafted by their expert legal partners.
We can’t do anything regarding current affairs influencing the property market, but as all property sstatistics indicate rental properties are in high demand and if you can supply the need while eliminating the risks, the dream might not be too big to pursue. Of course, it’s easier said than done and one should always start by doing your homework thoroughly before buying — for whatever reason. The latest edition (November 2017) of The Real Estate Investor Magazine gives some insights into doing your homework when searching for an investment property, like which area are you looking to invest in? Which type of property is the best choice for this area? Find out about occupancy rates and crime issues in the area. I loved the following statement in a Bizcommunity article I read: “Like most things in life, the more you know about property, the better you’re likely to do in it.” If we understand the property market, develop a feel for trends and pricing, we will be able to recognise opportunities as well as red flags.
Let the research begin, and may the dreams get wings.