Before you buy a unit to rent out, you need to decide on these two issues: how much can you lease it for, and to whom?
In 2018 Q4 the less than R3000 market had the lowest good standing ratio of 73.21% with the More than R12000 segment recording the highest vacancy rate of 11.2%. In contrast, the R7000 to R12000 segment offered the lowest risk in terms of vacancies at 6.1% as well as the best payment performance with a good standing ratio of 86.36%, the TPN report shows.
So how do you know if a property is a suitable investment to rent out?
Check the zoning of the property. Particularly if the investor buys with an idea of using it as a short term let, rather than long term let.
Check the management rules in the case of a body corporate, that these do not prohibit short term letting (if this is what the intention is) as well as the conduct rules for whether pets are allowed or whether there are any other special conditions imposed. Management rules of sectional title schemes are more difficult to change than conduct rules, and it needs to be weighed up whether these will affect the way the unit is used.
Check the last four trustee minutes if the property is in a sectional title scheme or member meetings minutes in the case of an HOA.
Ask for a copy of the AGM minutes in case to assess what decisions have been made in the scheme with regards to management as well as what the financial state is.
Ask for a copy of financial records, if the unit is in a community scheme.
Check the required rental against what certain tenant reports are saying – is this in a reliable or achievable price bracket?
Ensure that the price paid for the unit is not too high, that the required repayments each month will be covered in large part by the rental achieved.