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YOU CAN BE A TENANT AND A LANDLORD
Category Property News
JUST because you cannot afford to buy a property you love, or in an area in which you want to live, does not mean you need to stay trapped in the rental market. You can still take your first steps on the property ladder without having to leave the comfort of your rental home, or give up the lifestyle you are living in your suburb of choice. As long as you buy a property that others will want to rent, you can have the best of both worlds. Unfortunately though, the number of people who have caught onto this mindset is low. Richard Hardie, chief executive of Knight Frank South Africa, believes this will change as people realise they should look for a property they can afford, even if it is not where they want to live. "What I say to people and the same was said to me by my parents, is: 'You don't have to buy where you live. You can buy property as an investment in another area you can afford and which makes you money. At least you then have something for your retirement'." The numbers of people who cannot afford to buy a home, especially in places such as Cape Town, where wages are low and house prices high, is increasing, and a "very high number" of people rent homes they love because they can afford the rent but not the sales prices. Hardie says the message "we really need to get across" to people, especially young people, is that they must focus less on what they are going to live in and more on what can work for them in later years as an investment. "It can even be a smaller property they can move into in their retirement." In Centurion, at least 50% to 60% of tenants would not be able to afford the homes they are renting, says Tiaan Pretorius, property consultant at Seeff Centurion. While not many of them have made the decision to buy elsewhere, some have bought investment prop erties and then used the rental income to pay their current rent in more affluent areas. "For R700 000 a buyer should be able to get a two bedroom unit in The Reeds, Monavoni or Die Hoewes. These areas offer a great place to gain entry into the Centurion property market." Similarly, Gauteng tenants looking to get a foot on the property ladder can find apartments in Fourways, Midrand, and even some parts of Bryanston, for under R900000, says Charles Vining, man aging director at Seeff Sandton. However, he does not believe that Joburg buyers will compromise by renting instead of buying in their areas of choice. "This is because these buyers adjust their home searches to purchase within their price ranges." Tenants who are more than likely unable to afford to buy the homes they are renting are those living in gated communities or golf estates, where properties are priced at a premium and levies and running costs are higher than suburban homes. "This makes ownership more costly than renting because many of these costs are carried by the landlord, not the tenant," Vining says. Aspiring homeowners looking to rent in areas that have their hearts but still invest in property should look to buy in areas that offer good, stable returns, both in rentals and future sales prices, says Jill Lloyd of Lew Geffen Sotheby International Realty. Those with a small budget should "always go for a tiny house or flat in the best possible area and position that your budget will allow". When looking for "best possible" areas or suburbs that will be future hotspots, they should "look for the places that were really popular in the past but have become a little dilapidated. History will generally repeat itself. You only have to look at London to understand this". Lloyd says: "Property is an amazing long term investment and I often wish I still owned the houses I have owned in the past."
IN GATED communities and golf estates in Sandton, house rentals start at about R25000 a month, says Seeff's Charles Vining. However, those looking to buy such properties, would be "hard pressed" to find one below R3.5 million or R4m. This translates to a bond repayment of R35 000 to R40 000 by comparison. For buyers with smaller budgets, Vining says Fourways and Midrand are fast becoming business and entertainment destinations in their own right. "I think investors in these areas will greatly benefit from capital gains if they can hold their properties for five to seven years or more." Midstream Estate, Centurion Golf Estate, Southdowns Estate, Cornwall Hill Country Estate, Irene Farm Villages and "almost all the estates in Eldoraigne" are among those offering the best lifestyles, but are out of the price ranges of many buyers, says Seeff's Tiaan Pretorius. Rents of such properties vary from R18 000 to R30 000 a month. Pretorius says: "To purchase these properties will probably cost between R3m and R6m, with bond repayments from R30 000 to more than R65 000 a month." Buyers, therefore, often look to buy in areas like Centurion West, Rooihuiskraal, the Reeds, Lyttelton and Die Hoewes, mostly for investment reasons. "These areas offer everything one needs such as good schools, shops and public transport, and some also offer easy access to the Gautrain network. "Finding tenants for your investment property would therefore not be a problem," he says. Smaller two bedroom homes on the lower end are priced from R600 000 to R800 000 while three bedroom units range from R900 000 to R1.3m. While all suburbs in Centurion generally have potential to be up and coming hotspots, Pretorius says a few that could become the next "go to" suburbs include Heuweloord, Valhalla and the outer fringes of Lyttelton Manor. He says here the average sales prices for free standing homes on large stands and close to good infrastructure, shops and schools are R1.2m to R1.6m. Joburg buyers can still expect great returns from property not situated in their areas of choice.
Author: Lew Geffen Sotheby's International Realty