When deciding to invest in a buy-to-let property, there are some aspects you need to consider:
The trend towards buy-to-let properties seems to be on the rise. This is due to low interest rates and possibly the fact that banks grant up to 100% bonds in some instances.
Statistics from the National Realtors Association indicates that as much as 24% of total home sales were made up of holiday property, while another underutilised source comprised of surplus discounted and repossessed properties. The advantage with repossessed properties is that they can be turned into rental units with minimal cost and effort, and it is affordable.
According to FNB it is a good time to look at investing in property because interest rates are at such a low. FNB's Property Barometer shows that as little as 10% of properties purchased are buy-to-let investments.
The only real downside to buy-to-let investments is that banks do require a larger deposit on these properties as they are not the primary residence. But the income generated from rental does offset positively against the higher deposit values required by banks.
These are some costs to consider in buy-to-let properties.
The Rates and Taxes
This is a large monthly expense and in the event of tenants absconding you will need to be able to carry this cost until new tenants are found. If you have a copy of the current Rates and Taxes account, this will assist you greatly. You can obtain the current figures from the local municipality.
Town house developments
There is a monthly levy payable to the Managing Agents. Although his is not as high as Rates and Taxes, it is still a running cost you need to take into consideration. Some developments do not allow rentals so check with the Managing Agent or the Body Corporate before you purchase the property. Establish whether the development has home insurance to cover the property in the event of natural disaster or something similar.
Let's call it part of the bond insurance. This insurance covers the all the fitted components such as house structure and geysers in the event of damage or total destruction You don't want to be servicing debt without the asset. This, in my view, is a necessity not a "let's consider" priority.
Maintenance costs are not a fixed expense but it would be advisable to allocate funds for this purpose somewhere.
When taking all of the above into consideration, you will have an idea of general monthly costs.
Myroof has many distressed-, repossessed- and privately owned properties listed. Why not take a tour and find your investment?