Start Building...

By: BestBidOnline  12-13-2011
Keywords: houses for sale

"The problem with giving sound advice in the property market," says Lanice Steward, Managing Director of Anne Porter Knight Frank, "is that people are always inclined to suspect one's motives.

However it is surely significant that almost all the chief executives of South Africa's estate agents are now saying that the current time is a good one in which to start building capital through property - and I agree with them."

Steward said that if she were in her 20s or 30s right now she would be keeping a close eye on the property market and, in particular, would examine all local residential property developments in pursuit of good buy opportunities.

"New developments," she said, "have four big advantages. Firstly, they allow the investor to delay the bulk of his payment until transfer, which may be a year or 18 months away; secondly, a new development has no transfer duties and the banks include the VAT component in the sale; thirdly, there are no maintenance or upkeep costs for a year or two; and fourth, being these days almost always provided with adequate security new developments attract tenants and above average rentals."

Those contemplating property investment, said Steward, should begin by visiting a bond originator or their bank to establish what credit they will be able to get (and to find out about any outstanding debts that might impair their credit record).

Most developments today, said Steward, are sectional title and if they have been in existence for some time it is essential to inspect the body corporate's accounts and most recent annual general meeting minutes to try and ascertain whether the scheme is well managed and, in particular, if there is any possibility of a special levy being called for in the near future.

Having acquired their first investment unit, and with the help of a reputable agent, having installed a tenant, investors should immediately set about planning a follow-up buy and this process should, if possible, be continued over a period of years. Some investors with whom Anne Porter Knight Frank have dealt with over a long period, said Steward, make a point of buying a new property every 12 to 24 months.

"Obviously in the initial years of a property purchase the investor will have to subsidise the rent from other sources such as his salary, but in most cases within five years the rents do cover the monthly bond payments and from then on the investor is in a strong position. It pays, therefore, to subject yourself to some privation and austerity in the first five to ten years of property investment while you are building up your portfolio."

One of the keys to success, said Steward, is astute tenant selection: it is, she said, very definitely worth waiting a month or two longer rather than signing up a tenant whose credit and job record may not be squeaky clean.

Keywords: houses for sale

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