Buying an investment property in South Africa. What does this mean?

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• published: 19 May 2015
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VIDEO TRANSCRIPT: Reporter: When it comes to buying investment property in SA, the first thing you need to know is, what exactly is investment property? Simon: I think the simplest way to describe investing in property is not living in the property. There's a couple of reasons why someone would invest in property. The one is you would buy a property and you'd rent it out. The other type of investing is where you buy a place that perhaps needs some work and you've got an eye for that kind of detail, and you understand how to budget and how to spend, and you're going to renovate it and then flip it for a higher price. Reporter: So, if I was thinking of buying or looking into such a property, what would be the first things that I would need to consider when searching for a property like this? Simon: If we talk about the one that most people think of when you're talking investment property, and that's buying to rent - so there's this idea that you want to buy a place and then put a tenant in it. When it comes to investing in property, you actually need to treat it like a business. So, draw up a business plan. Put down what is the financial commitment that you want to make. What can you afford? What do you intend to get out of it financially? The location - look at the location through the eyes of good data, good statistics. What are the prices doing in the area? What are the rental demands looking like in the area? And then you should look at the type of property, not all of them are geared towards renting them out. Look at two-bedroom flats and apartments. They're very, very popular with tenants. A broad spectrum of people are in that market. And I think the last thing is the type of tenant that you want to address. Tenant demand tends to really be in the young or the older. So, you're talking about students, student accommodation, and small, lock-up-and-go places, or places for retirees. So those are some good points to look for when you're investing. Reporter: How does one go about acquiring the right type of tenant for your property? Simon: It's critically important. This is your little business, this your investment, and when you're picking your tenant you're effectively picking your business partner. So you've got to be really, really careful who you let into the property up-front. So get your property out there on online platforms like ours, make sure that it's advertised as widely as possible, take as many tenants through as you can until you feel that the fit is right. And then there are lots of great services that you can use, on our platform or others, where you can check on the tenant's credit history, or you can get a reference from their previous landlord. It's really good to do the background checks, to do the research that you need. Reporter: The whole issue around landlords, tenants, where can one go to get advice about that? Because that can also be a tricky issue as well, right? Simon: It's amazing how many questions people have when it comes to renting out property. Tenants - what are my rights? What do I need to sign in a lease? What do deposits look like? And then on the landlord's side, it's also really, really important - what if my tenant's not paying electricity? What if they're denying me access to the property? So we see these types of questions all the time. We get expert panelists to come and comment on articles. And then we put it into a real easy-to-use database of information and advice. So if you are in the market either as a tenant or landlord and you've got questions, we do have a space for you to come and answer those questions. Reporter: So basically the private property website is a one-stop shop for everything? Simon: Yeah. We like to think of ourselves as basically the premier rental platform in the country. We've got more rental listings than most. We've got fantastic resources in terms of information and insight. So if you are in the market to either buy a place and let it out, or you're a tenant looking for one of those properties, then we're the right place to come. Reporter: What is our Simon Bray tip of the day? Simon: I think buying to let is a great opportunity to make money, it's a sound investment, but you need to realise, are you picking it for the right rental demand areas and are you looking at the costs of ownership closely enough to ensure that you're making money at the end. Reporter: You can swing by www.privateproperty.co.za to visit their news and advice pages, as well as perhaps search for that perfect investment property for you.