Finding the right property.

First question generally asked is, what can I afford. Unfortunately, it is at this first hurdle where people get it horribly wrong. First time buyers are generally very naive and emotional, and this combination makes them sitting ducks for the sharks who trying to get another commission to pay their bills at the end of the month. Now let me just say that there are good agents out there, I happen to know a few personally and I promote them to everyone who can benefit from their knowledge. But I unfortunately have found that good, reliable, and trustworthy agents are few and far between and that the majority (more than 90% according to me) are there just to make the sale and get the cash and move on.

You have probably also been taught to buy a house you can just about afford and pay of this house over 20 years and create safety for your future. If this is what you have been taught, it is WRONG! A house you buy to stay in will always be a LIABILITY! Read my YOUR HOUSE IS A LIABILITY blog to find out why.

Questions that matter:

  • How much must be budgeted for the bond repayment? What if the repo rate doubled overnight?
  • How much are the transfer fees? (Buyer is responsible for transfer fees)
  • How much will you be paying for electricity and water?
  • How much will you be paying for rates and taxes?
  • How much will you be paying for the garden maintenance each month?
  • What needs fixing? What is the cost of fixing? What will need fixing in the next 5 years?
  • How much will you be paying for insurance on the property?
  • How much will you be paying to keep the pool clean?

Now this list does not stop. Most people only focus on the bond repayment and then buy the maximum they can afford to buy and forget about all the other costs they are going to be responsible for. A house will always costs. The house you stay in and do not receive any income on is a liability.

So, if you are looking at what you can afford, do not only look at the bond repayment, but take all the other costs into consideration as well!

Now you could argue that you could buy a Sectional Title and cut the costs, because you now share some responsibility with the body corporate.

Remember the following:

  • You are still responsible for your property and everything inside of it.
  • You are paying a levy every month for the communal areas to be taken care of.
  • You are now also paying for other owners / tenants’ bad behavior.

The bottom line is if you are buying to live in the property, you should not be putting the property into the asset bracket because it is a liability.

Now if you are comfortable with buying a liability for your own comfort then let us look at what you need to consider.

If you are buying Sectional Title the following should be considered:

  • What is the financial situation of the sectional title scheme? You could be held responsible for existing debt. As a prospective buyer you are entitled to this information.
  • Ask for the minutes of the last general meeting, to assess the history of the scheme.
  • What are the monthly levies? What do these levies cover? Do they cover all communal maintenance? Do they cover rates and taxes?
  • Are there plans for future renovations that new property owners will have to contribute to?
  • What is covered by the body corporate insurance?
  • All other questions you can think of should be asked, remember you have one chance to get the answers. Once you have purchased, the problems you did not know about becomes your problems and cost you money.

If you are buying a freestanding house consider the following:

  • Everything becomes your sole responsibility.
  • If you are not an expert I strongly advice you to find a professional person who has a good record to assist you with the process.
  • Rates and Taxes?
  • Insurance Costs?
  • Cost to keep garden serviced?
  • Cost to clean pool?
  • Where is the stop tap located? Are there any underground leaks?
  • Is the roof still in good shape?
  • Are there any structural cracks?
  • Is the electrical compliance certificate (COC), in place and do you have the contact details for the electrician who issued this certificate?
  • Be sure to get a proper plan of the house.

Buying a property is a big decision and one that should noy be taken lightly. The decision about what you can afford should also not be taken lightly as a miscalculation initially could potentially put pressure on you for the duration of the 20 years of bond repayment. Educate yourself before you start your real estate journey.

Real Estate Investment can be daunting and certainly takes a lot of work and dedication, but if done in the correct manner can ensure a future of abundance.

Let us know your thoughts and tips.