With South Africa’s endless shoreline beauty, mountainous gems, paradise towns and other attractive world-class holiday locations, it is no wonder that there is great demand for homes in these areas to act as holiday getaways.
Richard Gray, Harcourts Africa Chief Executive Officer, says these properties are very popular and, when the right path is followed, can prove to be fruitful investments and value-for-money holiday bases.
Gray gives his top tips for buying a holiday home:
1. What can you afford?
“First off, and most importantly, is deciding on affordability,” says Gray.
He says there are tax implications when owning a second home, and you also need to calculate thoroughly whether you can afford paying a second home loan and utilities, especially if you plan on letting the property.
If there is a time when you have no tenants, can you afford to cover the shortfall?
2. Location, location, location
Next, Gray says you have to choose the location.
“It seems simple enough to decide on the location of the holiday home you wish to buy, as you surely want to purchase where you prefer to go on holiday,” he says.
“However, does investing in this location actually make sound financial sense?”
When you start, identify a handful of locations you usually visit, and also identify areas you find by doing research on locations that show the most promise. Narrow these suburbs down to match your needs, and then do more homework.
“Contact agents in each of these areas and ask them what the average return on investment and growth percentage has been for properties in your price range,” says Gray.
“Also ask if there are any developments going up in the area, which will be a sign of interest by investors, and could present you with possible property opportunities that will be well looked after by a body corporate.”
3. Finding your holiday home
Once you’ve decided where you want to buy, Gray says distance comes in to play as you are often buying far from where you live.
“This is where property portals and the online space can be a great help,” he says.
“Ask the agent if they have virtual listings, which are video tours, of homes in the area for you to see. This way you can get a real good look at the different properties before spending the money to go and view.”
Assess demand in the area by browsing listings of similar value in the suburb online. Here you can gauge what the demand is, so when the time comes and you decide to let out the property in the months you’re not there, you know you will be able to find good tenants relatively easily.
4. Maintaining your holiday home
Gray says maintenance is always a major concern, largely because owners usually live far from their holiday property.
What is the point of buying a home you want to enjoy during your stress-free time or to act as an investment if it only depreciates and causes headaches because of a lack of maintenance?
“There are a few options here, and the best possible route is hiring a managing agent that will greatly reduce your hiccups by constantly keeping an eye on the property,” he says.
“Managing agents also ensure you are informed when problems arise, and they have electricians, plumbers, and so forth on call that can attend to any problems that occur while you’re away.”
5. Furnishing your holiday home
Lastly, Gray says furnishing a holiday home is often required, and this can prove tricky.
“Many holiday homeowners break the bank hoping to create a space that resembles home as well as an environment they feel comfortable in when they go on holiday,” he says.
“This is a personal choice and should also be considered carefully. A home standing open an entire year with many valuables can be a target for potential thieves. So be smart.”
All things considered, Gray says buying a holiday home is an exciting venture, and with the right agent assistance and research, can be a lucrative investment and a place where memories will be etched into the minds of those who spend their holidays there.
The information in this article is courtesy of www.property24.com
Times are tough. Inflation’s up, interest rates are up, debt repayments are up and most consumers simply don’t have anything left at the end of the month for savings, no matter how hard they try.
“And that is one of the most important reasons for anyone buying a new home to choose a property that not only meets their size and design criteria, but is also likely to deliver a good return on their investment,” says Bill Rawson, Chairman of the Rawson Property Group.
“The majority of South Africans are battling to make ends meet at the moment, but those who are homeowners are lucky in the sense that they are at least building up equity in their homes month-by-month as they make their bond repayments.”
Equity is the difference between the value of your home and the amount you still owe on your home loan, he explains, and while it should never be regarded as a substitute for actual savings, it does provide some financial protection in the event of a real emergency.
“It also happens to grow much faster if the value of your home is rising at the same time as you are paying off the bond, as does the potential ‘profit’ you are likely to make on your original investment in the property.
“If, for example, you purchase a R1 million property with a 10% deposit and the value rises by 5% in the first year, you will not only have added R50 000 to your equity in the property, but also made a 50% return on your original investment of R100 000.”
Indeed, says Rawson, one of most attractive things about investing in real estate instead of shares or other assets is that you generally only have to pay a small percentage of the purchase price yourself, but always get to keep 100% of the profit on the whole investment.
“However, there’s an old saying that you make the money when you buy a property, not when you sell it – which means that in order to maximise the profit potential of a real estate purchase, you need to seek out a home that is likely to show a substantial increase in value over the next five to 10 years and then try to buy it as cheaply as possible.”
Some vital things to remember while you’re doing this, he says, are the following:
- Make sure you buy a home in good condition. Renovations and repairs always take more time and money than you expect and tend to eat into the return on your investment, especially if you sell again relatively quickly. Besides, there’s always the danger with a fixer-upper of hidden defects in the plumbing and electrical systems, in the roof or in the foundations, and these are usually the most expensive problems to rectify.
- Don’t hesitate to negotiate. Even if you’re quite satisfied with the location and condition of a home you would like to buy, it never hurts to ask questions and see if you can’t better the price. If you can establish that the seller is moving to take up a new job, or has already made an offer on another home, for example, there will be some anxiety to finalise the sale and a lower offer might well be accepted.
- Consider buying a distressed property. Most of the banks have gone out of their way over the past few years to help homeowners who found themselves in financial difficulties and no longer able to afford their home loan repayments. And one of the most effective ways of doing this has been through their special “distressed seller” programmes. Certain estate agencies have partnered with the banks in these programmes, and while they would like to get the best possible prices, their main aim is to sell in the shortest possible time and the reality is that these homes usually do sell for less than current market value.
With some careful “shopping”, prospective buyers and investors can thus often acquire properties with good value growth prospects at reduced prices – or perhaps access areas they would not otherwise have been able to afford.
The information in this article is courtesy of www.property24.com
1. Property investment offers relative stability
Investing in the stock market can often bring forth great returns, but it is also very unstable and there is always a possibility that you will lose a lot of your capital. Experts advise that you balance your investment portfolio by choosing a relatively stable option and in South Africa, the property market is just one of these options.
2. Property shortage in South Africa
The country’s turbulent political past has left South Africa with a shortage of good housing and the government has made solving the problem a high priority. This focus on housing will result in a long-term structural growth potential within the South African property market, with people migrating to better neighbourhoods and more expensive homes set to continue for a long time to come.
3. Property cycles in South Africa
Many people dream of having their own property and the added sense of security and comfort of a continuously growing asset that goes with it. When young people leave school and first enter the working world, they enter the property cycle through renting a flat then buying one, selling it off and then buying a small house or townhouse. Over the years, they will become more financially secure and then will be able to invest in their dream property, which they are likely to sell once they reach retirement in order to move back into a smaller house or townhouse. The high demand for property in South Africa means that an astute investor benefits throughout the property cycle, as any investment is bound to provide high returns.
4. Stable vs unstable world
With the effects of 9/11 echoing throughout the globe, everyone has now become aware of how extremist attacks can have a profoundly negative effect on the economies and stock markets of the countries affected. Terrorism is a decidedly global problem, but when it comes to South Africa, experts are of the opinion that the country remains one of the least affected by extremist activities. This balanced position is proving the catalyst for property investment interest from abroad. The increase in foreign investment is certainly stimulating an already active economy.
5. High property rentals rate
A series of interest rate hikes and escalating inflation has caused an escalation in the number of people choosing to rent rather than buy property in South Africa. This means that the buy-to-let market is becoming an increasingly popular property investment option around the country, particularly in the bigger cities. Renting a property out will also help you to pay off your bond, while the value of the home steadily increases.
6. Top holiday destination in the world
The fact that holidaymakers put South Africa near the top of the list when it comes to prime holiday destinations means that the country is home to a picturesque landscape, both diverse and naturally beautiful. There is a location to suit any taste, from azure blue sea and sandy white beaches, to lush green winelands set in the mountains, extensive nature reserves and game parks with an abundance of wildlife that boasts the sought after Big Five and hundreds of bird species, as well as the ultimate whale watching and shark diving experiences. With so many visitors flocking to South African shores to take advantage of the excellent climate and endless natural beauty, who wouldn’t want to make this country their home?
7. Favourable exchange rate
If you are earning pounds, dollars or euros then you are leap years ahead of locals when it comes to the affordability of property in South Africa. More and more foreigners are seeing South Africa as the ideal property investment location, particularly in light of the favourable exchange rate, as well as the fact that the economy is the second strongest on the African continent. Even if you’re a local and don’t earn foreign currency, the fact that South Africa has such a strong economy means that you are guaranteed to yield excellent long term returns on your investment.
8. No tax on property purchases
The good news is that there is no VAT payable on property purchases in South Africa. However, the seller is generally liable for agent’s fees that incur a percentage of VAT. There is also no stamp duty on property purchases in this country, which means that buyers are sure to enjoy the added benefits. Another drawcard for the country as a prime investment location is the fact that there is no inheritance tax on property.
9. Tax breaks on property development
Real estate developers are given tax breaks of up to 20%, while another 20% tax break on rental is available for renovation projects. Consequently, the commercial property market in South Africa is currently outperforming markets in many Western countries. Even with the global economy experiencing difficulties, the commercial property development market in South Africa is booming.
10. High growth potential
It has already been said that the shortage of housing in South Africa and the government’s high priority to alleviate this problem means that the country has a high growth potential. The growth is also due to the development of a strong middle class, which is providing an increase in the demand for homes. In terms of facts and figures, the housing market in the Western Cape is showing a steady growth of 13.9%, while other metropolitan areas are growing at an annual rate of 15.6%. As we all know, a steadily increasing demand translates into high returns on a long term investment basis.
The information in this article is courtesy of www.propertyshowrooms.com