What you need to know about buying a second property
Category News
Buying property is always a good investment and a potential way for most South Africans to increase their wealth over time. However, if you are thinking of buying a second property, then it's best you bear in mind these 6 important facts:
Why do you want a second property?
If it is for:
- Your retirement : choose a home designed for older people - e.g. single level home or if an apartment, if there is a lift.
- A holiday home : ensure that, in the long term, it will have sufficient amenities, space - both indoors and outdoors - to meet the future needs of your family.
- Investment purposes : consider what would appeal to renters or future buyers rather than your own preferences.
Will you be able to afford it?
If applying for any home finance, you will incur the usual bond registration costs, transfer duties, legal fees and deposit requirements. You will also need to prove that your expenses are not higher than the monthly bond repayments.
Getting pre-qualified for a home loan is ideal for determining upfront what you can afford - an experienced real estate agent will be able to provide you with more details on this so contact us at: https://www.homesofdistinction.co.za/contact/.
You can also use a bond calculator to determine your own bond affordability, bond and transfer costs and repayments at: https://www.homesofdistinction.co.za/calculators/
Are there any additional costs?
Maintenance and insurance costs on any property will be ongoing. When determining the rental income for the property you will need to take into account some of the monthly charges which include rates, taxes, levies, electricity, effluent, water as well as letting agent's fees.
The rental price should be similar to other properties in the area - but this may be insufficient to cover your monthly bond repayments! A letting agent will take care of advertising and showing the property, screening applicants, drawing up the lease agreement, collecting the deposit and monthly payments, and dealing with maintenance issues. Talk to the area rental expert for more information about these at: https://www.homesofdistinction.co.za/contact/.
Remember, it is a risk if you will be relying solely on using the rental to cover the monthly bond repayments as there is no guarantee you will always have 100% occupancy. It is best to have a safety net of at least 6 months' monthly repayments just in case!
What are the Tax implications?
If you plan on renting out your second property:
- You will have to declare this as part of your earnings;
- If you make a profit from the rental income, this is taxable.
When selling this property, you will be subject to Capital Gains Tax.
It's best to consult a tax professional for more advice on all the tax implications of owning a second property.
5. What you should know about the property?
As with all property purchases:
- Research the area you wish to invest in before buying a property there. It's important to know about its crime rate, amenities, transport availability, schools etc. as these may be essentials to attract tenants or buyers.
- Check out your potential purchase for damp, poor or weak finishes and any structural damage that may need attention.
- Ensure all compliance certificates supplied by the seller are recent and 100% in order - electrical compliance, electric fence and gas.
In short, make sure it is a sound investment before you buy.
6. Some essential property investment tips
It's always best to talk to a professional so rather consult a reputable real estate agent - an area specialist - for expert information for that area about :
- The property's asking price.
- The potential for and projected growth in property value.
- Rental prospects and rental rates.
- Occupancy for when you aren't likely to be using the property, if it's to be a holiday home.
Be proactive and certain of your investment and contact us for professional advice at: https://www.homesofdistinction.co.za/contact/.
Buying a second property might be a great means of growing your investment portfolio but research this thoroughly and consult the necessary professionals for advice before purchasing that second property. For an outstanding, reliable and personalised residential property service, contact us at: https://www.homesofdistinction.co.za/contact/.
To contact us, follow the link: https://www.homesofdistinction.co.za/
To contact one of our Real Estate Agents, follow the link: https://www.homesofdistinction.co.za/agents/
Author: LV Digital
