Buy-to-rent investors can sometimes use the accumulated equity in their existing bonds - but beware of the pitfalls

In recent months, says Mike Greeff, Chief Executive of Greeff Properties, there has been a big return to buy-to-rent residential property purchases. Many of those who were active in this field five or six years ago are now once again coming back to it.

“The more volatile the JSE Securities Exchange becomes, the more property is attractive to the average man-in-the-street investor,” says Greeff. “The Eurozone debt problems, which it seems are likely to be with us for three or more years, are further enhancing property assets.”

Property, he adds, is seen by many investors as a rather ‘dull’ channel, but it is one which ‘plods steadily onwards’ and almost always gives increased rental returns year-on-year.

“This type of investment has the huge advantage that it can be funded by gearing. This applies to almost no other investment and certainly not to share or bond purchases.”

In encouraging more people to go this investment route, says Greeff, he often has to point out to them that if they have been paying their current bond for several years they have probably built up available equity in this which could be used for further purchases.

“Now,” adds Greeff, “is a very good time to be investing in property because it is a buyers’ market with considerable stock available at very competitive prices, but every purchase has to be approached with great caution.”

“It is absolutely essential to do your homework. Look up the figures of recent sales in the area, and talk to as many agents as possible. Read the newspaper advertisements for the area in which you are interested. If it is a sectional title unit, check the reputation of the managing agent and insist on seeing a copy of the scheme’s accounts. Remember, too, that if you are using your bond’s equity you are putting your own home on the line. While this is the route to go, it does require great caution and the assistance of professionals who know the market.”

Article by: www.greeff.co.za