How to invest smartly: Things to keep in mind when buying a home
Category Landlords / Investors
When you're buying a home, it's vital that you invest smartly because property is one of the best investments you can make - if you do it right. Why? It can offer you a guaranteed return, be a stepping stone to greater investments and allow you to leave a legacy for your loved ones.
There are things you need to keep in mind when you consider investing in a home, or you might lose out on these benefits. Working with the right people, doing your research and considering all the costs involved are all key steps to helping you make the best decision for your financial future.
Check out our hints for investing wisely in a house, flat or apartment - whether it's for your own use or to rent out to earn an additional income:
Watch our tips for making things easier and read on to find out how to take the effort out of selling your property:
Five tips for investing wisely in a home
1. Get an estate agent, and make sure they're legit
If you're looking for a property to invest in, a professional estate agent can make a world of difference. If you know what city you want to find a home in, then you can easily reach out to a reputable estate agency and ask to be introduced to a skilled estate agent for help.
The estate agent should be able to guide you to identify the areas that show good growth in property values. They should also be able to give you honest advice regarding the true value of properties available on the market.
Don't just pick the first estate agent you meet though. How many people have said: I wish I used a proper estate agent from the start? The right property partner by your side can save you a lot of time, effort and money. But an inexperienced estate agent, or agents looking to make a quick buck out of clients, may make promises that can't be kept or set unrealistic expectations.
There's no room for error when it comes to your choice of investment, so select your property practitioner wisely.
2. Take your time; do your research
A good estate agent can recommend several properties for you to consider, but getting involved in the process can help you make your final decision with confidence.
Before jumping onto property portals to scope out the latest property listings, make sure the area you're targeting offers the growth you want. Consider cities, towns and suburbs that will both make a good place to call home and show growth.
Most of this research can be done on the web.
Tool to try: Property24 Property Trends
Put this valuable platform to work to find out whether the area you're interested in shows good investment value.
Check out Property24's Property Trends page and zoom in on your area of interest. A quick look at the graphs on the page will show you whether the average sale prices of homes in the suburb have increased over time, and how big the difference is between the price sellers think they'll get for their properties (Asking Price) and what they received (Sale Price).
The light blue line shows how the average sale price of properties in the Western Cape has increased since 2012, according to Property24 at the time of publication.
3. Double-check that the price is right
There's nothing worse than realising too late that you've overpaid for your house. When you've identified a home, it's important to double-check the value of the property.
A home may have beautiful fixtures and fittings that can make it more desirable, but its worth is based on its structure and the area's popularity. And that information is readily available to anyone.
A good estate agent can give you their honest opinion on whether the asking price is reasonable, but you can also do your own homework.
Tools to try: City of Cape Town's GV2018
This online platform allows you to check the value of most properties in Cape Town. The General Valuation Roll will also show you the rates that you will pay for a specific property in the city.
LookSee Property Guide
Standard Bank's free online property guide shows you the estimated value of freestanding homes, flats, apartments and townhouses. It also indicates the price at which the property was last sold and its minimum and maximum estimated value so that you can make an informed decision about your purchase.
4. Calculate the total cost (* very important)
The advertised price of the home you're considering is never the total cost of buying the property.
Several other costs will be added:
- Transfer attorney fees
- Bond registration costs
- Regular maintenance costs
A few smaller fees include Postage, Petties and Deeds Office Fees. Use an online calculator or work with your estate agent to determine the actual cost to ensure the property is still worth the investment - and suitable for your budget.
Don't forget to consider the once-off and annual maintenance you will have to do to keep your property in good shape. Many homeowners think they can get away with little or no maintenance done to their home, but this is one of the biggest mistakes you can make.
It is vital to maintain your property if you want to keep the value of your investment intact. If your home is not kept in tiptop condition, you won't be able to find tenants for it, or if you eventually decide to sell, potential buyers will have room to negotiate a lower price - which eats away at your profits.
Tool to try: Transfer Costs Calculator
Use NS Property Solutions' calculator for a preliminary indication of the transfer fees on the property you have in mind. Make sure to confirm the exact costs with your estate agent before you make your final decision.
5. Don't say yes to the first home loan
Not all home loans are created equal. You can - and should - shop around for a loan, or bond, that offers you the best interest rate.
This process can be difficult to do independently, especially if you're pressed for time to secure a bond. That's why successful property investors rely on bond originators.
Bond originators are critical to the house buying process. These are companies or individuals that work with banks and borrowers to complete a home loan transaction. But they do more than that: they liaise with several financial institutions to get you several home loan options. That way, you can choose the loan provider that gives you the lowest interest rate.
While you could try to tackle this process on your own, it could take a lot of time and effort to contact every bank and loan provider in the country. Not only that, but you won't have the ability to negotiate with the bank as effectively for a lower interest rate.
Elle Finance - Mortgage Max is NS Property Solutions' preferred bond originator, which has relationships with eight banks and financial institutions.
Rely on services like Mortgage Max and tools like Property Trends and LookSee to thoroughly research every aspect of the properties you're considering for your investment. And don't skip any of the steps in the process, or you might never see a proper return on the investment you're making in your home.
Don't let the process scare you. There might be lots of work to do before you can make your choice of home with confidence, but property is still one of the best investments you can make.
Find out why in our article Investing in property: Why it's still the best investment you can make.
Ready to take the first or next step in your property journey? Contact us to work with an expert agent or see what we offer investors.
Author: NS Property Solutions