What to consider on your Property Investment - Part 2

by Emile Grobbelaar


Property Investment

In our previous Times article (found here), we discussed three important things to take into consideration when making a property investment purchase. The following terms were explained in that article:

  1. RVR – Rent Value Ratio
  2. NETT ROI PA – Nett Return on Investment per Annum
  3. Return on Cash

Although the above are the most important factors to consider when buying a property, there are other things that also play an important role in owning and managing a property which will influence the income/return on the property. They are:

  1. Maintenance Cost
  2. Vacancy Provision
  3. Rental Managing Agent

Let's discuss each in detail.

  1. MAINTENANCE COST
    This cost will always be part of the property investment business. It is difficult to know what it will be and what the effect will be on your investment return. A good way of making provision for it, is to allocate a percentage of the monthly rent amount to a maintenance fund. You can decide how big or small that percentage should be but have a target total so that you can stop with the allocation when that amount is reached. Make sure that money is kept in a separate account. This money should be used for general maintenance for which the owner is responsible or when the tenant's deposit is not enough. It can also be used towards bond- and levy & rates account payments when the property is vacant. If you have this available, paying for maintenance, bond, levies or rates will not affect your pocket directly when it is required. Always ensure to replenish the account when the funds are used.

  2. VACANCY PROVISION

 

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