1 week ago
Students and tourists are real estate’s ultimate market – if you give them what they want.
If you’re looking to invest in property but aren’t sure where to put your rands, student rentals and holiday accommodation could be worth your penny.
Pam Golding Properties area manager for Durban Coastal, Carol Reynolds said location and rental returns were key factors to consider when looking to purchase investment property.
“Buying the right kind of residential property in the right location and at the right time in an interest rate cycle, are key ingredients for extremely sound investment potential,” she said.
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Students have money?
Short-term rentals located in busy areas are seemingly a cash cow for investors.
“If you are [planning] to dabble in the short-term letting market, then your investments should be in popular tourist hubs where there is ongoing demand for holiday letting,” Reynolds advised.
“The student market is another asset class that can be attractive to investors. The benefit of the student market is that parents will sign the lease and they will stand surety for the monthly payments, which minimises your risks as an investor.
“Students also ultimately move on and vacate, minimising the risk of unlawful occupation.”
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Interest rates
South Africa’s high inflation has left many homeowners struggling to repay their loans, forcing some to consider parting ways with their property.
Meanwhile, potential buyers are thinking twice about making the costly long-term commitment.
Weighing in, Reynolds said now might be the best time to make the pricey purchase.
“Given that interest rates are likely to start entering a downward cycle later this year, augurs well for home buyers and investors,” she said.
“If you can secure an investment now and get the numbers to work within your budget at the current interest rates, then the advantage of seizing the opportunity to purchase now before house prices start increasing, is that as soon as the cycle turns, you will reap the rewards of the declining interest rates and enjoy greater profitability,” she explained.
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Location matters
Emphasising the importance of a good location, Reynolds said properties in less appealing locations had low demand, and didn’t appreciate in value over time.
“In a good location you will enjoy capital growth and also benefit from sound returns.”
Apartment blocks and sectional titles have gained popularity in urban areas over recent years. So, if you’re looking to purchase an apartment, the expert advised investing in blocks with healthy financials and well-managed body corporates.
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‘Cheaper properties, higher returns’
When it comes to the price tag versus return on investment, ‘cheap’ doesn’t always mean ‘bad’.
Echoing, Reynolds said the general rule is; cheaper properties enjoy higher returns, further advising property owners to secure good tenants.
“It is a balancing act between high returns, good long-term growth and finding good quality tenants.”
Reynolds shared the blueprint to profitable property investments.
“Coastal towns do well with holiday letting, business hubs are great for corporates and long-term lets, while suburbs with excellent schools are ideal for small family homes and building a portfolio of townhouses or family homes.”
When to sell? Reynolds said in the ideal world, one should never sell their property.
“Unless the market starts to tumble and the currency devalues significantly, my rule of thumb is to always be a buyer and never be a seller. If you need to sell then of course, circumstances will dictate, but always try and reinvest into the property market as soon as you can.”
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