I bought my first investment property when I was 24 years old. It is a small two-bedroom Townhouse in a new, secure complex. The whole process of buying the unit, and acquiring a loan, was relatively simple with no hiccups or delays.
These days it’s a slightly different story; banks are reluctant to give young people loans with their parents standing surety.
Up until about 7 years ago there was a saying that “Banks love property” meaning that as soon as you own one piece of real estate, it would be quite simple to buy more property using your initial one as collateral.
However, at the moment banks are much more interested in Cash Flow; they want to see how much income is flowing into you account each month. A perfect example of this is a friend of mine who is a farmer. His land has an estimated value of around R8 million, but when he applied for a loan to buy a small townhouse the banks didn’t even recognize any of his property in the application; they wanted to see is salary.
So yes, it is a good time to be buying property, but there is a lot of research to do first. Shop around to see who will give you the best deal on your loan. Also remember that electricity costs are unbelievably exorbitant at the moment, and is a big expense to bear in mind if buying a house to rent out. (I.e. make sure the electricity cost is built into the rental fee, or ensure that the tenants pay for their own electricity by installing a meter).
written by Rory
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