Buy-To-Let Investments: Everything You Need To Know

Buy-to-let investments entail buying a property with the intention of renting it out. These investments are generally long-term and can be extremely profitable if executed correctly. What's more, these investments are a great first step for those looking to enter the property investment game.

"With a strong rental market that shows no signs of weakening, a well-chosen buy-to-let investment is a sound one for anyone looking to earn a profit and supplement their income," notes Andre van der Merwe, property development specialist at Chas Everitt.  

With that in mind, let's get into the nitty gritty of buy-to-let investments. 

What are the benefits of buy-to-let investments?

Property is considered to be one of the safest and most profitable investments the world over. Buy-to-let investments offer owners a passive income in the form of rent. Additionally, they also make great long-term investments as they increase in value over time. 

Key considerations for buy-to-let investments 

Do you have time to manage a property?

Being a landlord goes much further than simply sending a rental invoice each month. It involves finding trustworthy tenants, maintaining the property and so much more. This can be extremely time-consuming so it's worth thinking about hiring a property management company to do it for you. However, this is an expense that you will need to take into consideration when calculating your return on investment. 

Unexpected expenses

Other than the initial expense of purchasing the property, maintenance-related expenses are more than likely to arise. From leaking roofs to burst geysers, these are the types of issues that you as the landlord will be expected to address immediately. Hence it is critical to have some savings and a budget in place to deal with these unforeseen expenses. 

Location

We know it's a cliché but: location, location, location really matters when it comes to buying property. For buy-to-let investments you should always consider your target market first and what they would look for in a property. For example, if you're buying in a student area like Auckland Park, Hatfield, or Stellenbosch, you need to look for a property that accommodates the student lifestyle, rather than a full-size family home for an upmarket clientele. Similarly, you wouldn't want to invest in a studio, lock-up-and-go style apartment in a popular family suburb. It's all about purchasing the right type of property in the right area for your target market. 

Condition

Many investors are willing to buy 'fixer-uppers' so that they can add value before renting the property out and ultimately selling. Adding modern amenities means that you can rent the property out for a better price and get a better return on investment. However, when undertaking projects like this you should be extremely thorough during the inspection and double-check any quotes given on renovations to make sure you are not going to spend more than you can expect to get back. 

Financing

Once you've found the perfect investment property the next step is to get the best possible deal on a bond. This is a very important step as your monthly repayments will inform the rent price. Another aspect to consider is interest rates. Increasing interest rates can be both positive and negative for buy-to-let investors because higher rates will equate to a higher bond repayment but will also keep the rental market strong due to fewer people being able to afford their own homes. 

"Buy-to-let investments are big commitments that should not be entered into lightly. However, when purchased with expert advice and support they can be extremely successful. In fact, many of our clients who own rental properties have been able to enjoy an early retirement," says Van der Merwe.

There's no doubt that buy-to-let investments have extreme potential. If you think this adventure is for you, contact Andre van der Merwe or an experienced Chas Everitt agent for the best advice on how to get started.