5 Tips for buy-to let Investors
Category Advice
Buying property with the primary purpose of leasing it out, can be a highly lucrative investment. Particularly in South Africa, as rental housing is in high demand due to the strict lending criteria involved with acquiring a bond. However, it is important to conduct a fair amount of research prior to taking the plunge in order to ensure that you gain a high return on your investment. Here are a few tips to keep in mind when investing in a buy-to-let property:
1. Use an experienced letting agent
It can be highly beneficial to appoint a professional rental agent to assist you with finding appropriate tenants. Letting agents help remove any personal contact between the tenant and the landlord, making the ordeal completely objective. This is because it ensures that the landlord does not get drawn in emotionally if the tenant is experiencing difficulties which could lead to late rental payments. In addition to this, a good letting agent will have extensive knowledge of the legal requirements involved in drawing up a rental agreement. This will ensure that the rental agreement is airtight and covers all possibilities, thereby protecting you if any issues may arise.
2. Conduct thorough background checks
If you do not use a letting agent, it is crucial that you vett any prospective tenants very carefully. Ask for proof in income, three months of bank statements, salary slips as well as any possibly references. Phone the tenant’s place of work to confirm their employment and analyse their documents thoroughly to ensure that they are financially viable.
3. Choose the right property
Buying to let enables homeowners to generate income from renting out the property, which can be put towards bond repayments. This way, homeowners can pay off their bonds while the property appreciates in value each year. However, it is important to choose the correct property and neighbourhood so that you gain a return on investment. Research properties which are close to good schools, transport, shops and other amenities as these will be in high demand. These sought after properties in good neighbourhoods, are strong assets as they will attract tenants who are willing to pay higher monthly rentals.
4. Take expenses into consideration
Rates and taxes are another aspect which need to be researched carefully before making a decision with a buy to let investment. Investors need to ensure that their rental income covers these expenses, as well as a percentage of the monthly bond repayments. Conducting thorough research and charging a fair monthly rental payment in accordance with overall expenses, will ensure that homeowners gain a solid return on investment.
5. Renovations and Repairs
It is in the buyer’s best interest to refurbish, maintain and add value to the property as this will
maximise yields and overall capital investment. There are several ways to add value to a home and one can start by improving little things. Add more outdoor lighting, hire a landscaper, give the walls a fresh coat of paint and try ensure that the fences and gates are secure. This will not only lead to happy tenants, but improve the value of your home.
Purchasing an investment property is seen as a sound financial investment as it can be a great way to generate income. However, it can be a daunting decision for first time buyers. Therefore, by following these few tips and conducting thorough research, homeowners can agin the most out of their investment.
Author: Dormehl Property Group
