I recently wrote a post about buying your own property. I’ve since been inundated with questions from readers. I interviewed Sakhile Moremi, the founder and director of SK Heights Pty Ltd, who provided me with some much-needed info.
First off, tell me a bit about yourself and your property investment journey.
My interest in property investment started in 2014 when I bought my first property to rent out. In 2016 I bought voetstoots properties below market value, renovated it and then sold it. During that period I experienced a lot of challenges in having people manage my properties and was curious and keen to learn what happens in the back office. I’ve always had a passion for property. I established a company where I managed my properties and got other people that wanted me to manage their properties and together we developed ourselves into a property renovations and real estate company, which I fully joined in 2018.
For those wondering how to buy/invest in their first property. Where does one start?
Clear your credit record. Check your credit score and check with the credit bureau to see if there are any judgements pending in your name. Work on clearing all of that.
It’s very important to be realistic with your finances. Do an affordability application – it’s free with no obligation.
Once you know what you can afford, you’re able to estimate rough figures of what you need to start saving. You’re then able to set your saving goals and set targets for yourself.
Save, save, save. Start saving for your deposit, your bond-related costs.
Your ability and discipline to save will channel you in the right direction. One’s property journey tends to get exciting, especially when you’re a first-time home buyer, but ask yourself the most uncomfortable questions to get yourself ready – questions like what would happen should there be loss of income. This will enable you to plan ahead.
Have a thorough understanding of costs related to the entire process of purchasing your first property. The more you’re armed with this information, the more you are prepared and are able to be in a better position to understand the type of investment you are about to undertake.
What are some factors you need to consider before buying your first property?
There are several factors to consider:
- Location is important. Ensure the property you’re buying is in a desirable place to keep its resale value rising in case you want to sell it in future.
- If buying into the sectional title (separate ownership of units or sections within a complex or development), ask the agent for more details on the complex, such as body corporate details, its managing agent, body corporate rules, the complex’s maintenance plan etc.
- Be aware of any developments that might be in the area and how they will affect your investment.
- Consider the infrastructure and amenities you want to be close to, such as the highway, schools in the area, public transport, water supply, roads, etc.
- Your agent and seller need to disclose latent and patent defeats of the property to you when inspecting the property.
- Be aware of the crime statistics of the area. There are online portals that can make this information available to you.
- Have a very clear buying strategy (why are you buying the property, what plans do you have for the property, ie primary residence vs rental property vs flip and sell etc.). If buying into a sectional title, request for the sectional title’s financials, and get a hold of the 5–10 year maintenance plan.
Many first-time buyers are not aware of transfer costs and transfer duties. What are they and what is the difference between the two?
Transfer costs are the fees you pay the conveyancers to move the title deed from seller to buyer. Transfer duties are tax based on the value of the property and is paid to SARS.
What, if any, ‘hidden costs’ should one be aware of?
There are costs that you need to be aware of that might not be reflected in the purchase price. Ask your agent to explain and detail these to you. These include: transfer costs, bond registration costs, property transfer costs, bond initiation fees, any ongoing home loan charges, insurance for your property, home loan protection for your bond, levies you’ll be paying monthly if you’re buying a sectional title. Know your rates for the area you are buying into; bond initiation fee – find out from the institution financing your bond about this amount and try to pay it upfront. You have an option that it gets absorbed into your loan term, but by all possible means try to pay it off at the beginning. It’s important to discuss these with your financing institution and understand every cost.
After buying your first property, how do you go about expanding your portfolio?
Continue to maintain a good and healthy credit record. Maintain good payment records on your existing property, get yourself additional streams of income so you can get a second bond or save up to buy your other properties in cash or put in higher deposits on your other properties and finance less or buy land and build multi units.
Everyone’s finances are different. One needs to plan around their own finances and have a clear strategy on what is it they want to achieve and how they plan to achieve it.
Put additional money on your current property – be able to show additional income to help improve your credit rating.
Any other tips or advice?
Educate yourself as much as possible before even approaching agents or sellers. Buy property magazines, do research on the net. You’re in a better position if you’re informed and know exactly what you want. Ask as many questions as you can. A good agent should be patient with you and understand that you’ve never done this before, therefore you need to be comfortable with every step of the process.
Don’t rush into the decision to buy property – you can’t change your mind on a whim after signing a contract.