If this is your year to step up your property game by adding an investment property to your portfolio, then make sure you do the math before you make the purchase.
The market might not always support your ideal rental amount, which is why it’s so important to choose your investment property wisely.
As a baseline, the ideal rental income should cover at least the following:
- Bond repayments (if the property is financed)
- Rates, taxes and/or levies
- Property insurance
- Maintenance – an amount usually held in reserve
- Fees to the managing agent (if applicable)
To attract tenants, protect your property, enhance its value, and increase tenant appeal, owners often include value-adds such as:
- Excellent condition and quality finishes: Renovated kitchens, modern bathrooms, and a fresh coat of paint to boost perceived value.
- Extras: Pools, braai areas, and gardens can command premium pricing in family-oriented suburbs.
- Environmental and energy efficiencies: Energy (solar systems, inverters) and water management systems (boreholes, greywater, Jojo tanks) are holding more appeal for tenants because of concerns about loadshedding and water supply issues.
- Security: Electric fencing, alarm systems and access control are highly valued.
- Connectivity: Fibre-ready properties and/or an existing internet service appeal to remote workers and students.
While amenities and the overall condition don’t factor into the formula for determining the rental amount, landlords sometimes choose to retain control of their utilities, security, and internet service providers. Consequently, if you do include these utilities, then these monthly costs must be considered when working out your ideal rental amount.
Once you’ve determined your ideal rental amount, remember to be careful when it comes to tenants. Screening prospective tenants by conducting credit checks, verifying employment records, and checking references is a must.
Find out more by visiting RE/MAX.
