Affordability, liveability boost the desirability of sectional title property as rental investments
Category Newsletter: Article
Sectional title property, generally apartments and more compact living spaces, make for great rental investments, especially in high demand areas such as the Atlantic Seaboard, City Bowl and other coastal areas of the city.
The majority of rental clients tend to look for property that deliver on two key aspects - affordability and liveability - the latter including a great location and secure lifestyle.
Apartments and sectional title property tend to be more affordably priced compared to full title property and therefore offer an easier route to a lifestyle, especially in sought-after areas such as the City Bowl and Atlantic Seaboard.
The location is also very convenient for those who work in the city. With the significant rise in traffic into the CBD, renting or even sharing a flat is now a more preferred option. That is also why you will seldom find a well-priced rental flat sitting around on the market, these are generally snapped up quite quickly.
Where the CBD for example was quite a cheap area for rentals and you could rent for under R10 000/month, high demand has boosted rental rates to now well over R15 000-R20 000/month and higher for houses.
Sectional title property has also achieved higher capital growth over the last few years compared to full title which makes it an attractive option for astute investors to earn excellent capital value growth while at the same time achieving great rental income.
If you are thinking about investing a sectional title property, especially if it is for buy-to-let purposes, then we would recommend a few guidelines to bear in mind:
Hidden costs – ensure you are aware of the costs of investing in a sectional title unit. In addition to the normal monthly utility expenses that come with property ownership, there are additional levies applicable to sectional title schemes. In some instances, special levies are also raised for special projects.
Complex rules – while sectional title property are great investments for buy-to-let purposes, it is also a highly regulated environment and sectional title schemes are governed by legislation as well as complex/scheme specific rule. This includes for example keeping the body corporate informed on any change of tenants.
Finances and management – ensure you invest in a complex that is managed by reputable managing agents. Remember, you are investing in a shared development which means that aspects such as security and maintenance is not just you own to decide on, it is communal. The better the financial health, maintenance and management of a complex, the better value growth it tends to achieve. Be sure to investigate all of these aspects before you buy.
Location – if you are investing purely for rental purposes, then the location will be very important. Do your homework in terms of investigating the scheme and access to transport routes as these are vital to tenants. As a general guideline, properties close to shops and facilities, main transport networks and good schools tend to be in high demand when it comes to rentals.
Rental returns – be sure that you investigate the potential rental income and yields that you can expect on your property. Take care not to measure potential rentals by what is being advertised on property portals as there are a great many overpriced properties listed.
Choose the right rental agent – this then brings us to a final, but vital point and this is the importance of choosing a good and respectable rental agent. Someone who has a track record in business and in the area. Your property is your most important asset, do not leave the renal of it up to amateurs.
We are now entering the busy period for the rentals market, so if you are a landlord, be sure to give us a call for an evaluation of your property and the current rental rates in the area.
Author: Coastal Property Group
