Buying your first house is a dream come true for many of us, but there are also a myriad pitfalls to look out for. It's one of the biggest financial commitments you'll ever make and needs to be meticulously thought through before you make an offer and sign on the dotted line.
Many people believe that now is a good time to invest in property due to the low interest rates. Gaye de Villiers
of Pam Golding Properties says, "the South African residential property market is now in its sixth successive year of growth. This is the highest level of resilience and stability experienced in 20 years. All the fundamentals are in place for the market to continue on this growth path."
She believes that it is never too early to invest in
residential property: "Any person who has the money – whether by way of an inheritance or other means – would do well to fight off the temptation to buy fancy wheels or other popular trappings and, instead, invest in property."
Plan ahead
If you're buying a property as an investment, avoid poor
planning. De Villiers advises you to avoid the burden of a bond repayment that is more than you can rent the property out for. You should also try to pay off the bond at a faster rate than necessary so that you can build up a cushion of, say three years, to help you ride out any
problem periods.
You will have to pay transfer costs and other legal fees - take these into consideration. Interest rates fluctuate so make sure that you will still be able to afford the bond repayment even if the rate increases.
De Villiers cautions against making rash or impulsive
decisions when investing: "Do your homework. Investigate
the market and the area. Ask questions."
Don't be afraid to ask
If you are viewing a home for sale you need to ask loads
of questions. Try to look past the cute garden and lovely
bathroom and examine the property closely. Remember, you
are entitled to get professionals to assess the condition of the house. Don't forget to ask about the roads and highways close to the house to ensure that you are aware of noise levels in the neighbourhood.
By asking a few basic questions when buying property you will have recourse through the voetstoots clause, should the seller answer them untruthfully. These questions
include:
Are there any plans in the pipeline for further development in the neighbourhood, such as a new shopping centre in the area that could lead to a huge increase in traffic?
Are the electrical and pest certificates up to date?
Is there damp?
Is there a neighbourhood watch or other security?
What are the municipal rates?
What are the levies (in the case of a sectional title unit)?
Are there any defects in the property that the seller knows about? Has the seller recently repaired any defects and are there any guarantees on any of these repairs?
Have all fixtures specified, such as blinds, garden pots and a satellite dish.
Sectional title
Make a list of all the information you need about
the unit you are buying. You will have full title to this unit.
You also have a share in the common property and, therefore, added responsibility. You may be liable for
contributions to other costs, such as new security fencing.
Find out if there are any special levies coming up and, if so, try to determine the costs upfront.
Ask for a copy of the house rules, which contain guidelines for the complex, such as whether pets are permitted and what allowance there is for visitors' parking.
Request copies of the financial statements of the
complex or body corporate. The body corporate could be
insolvent or close to insolvency. You could be buying into a
situation that is riddled with debt, to which you will have to contribute, over and above your bond or levy. You could battle to sell your property later on, should the situation worsen.
The money game
Major banks and other financial institutions offer special deals and 100% bonds to first-time home buyers. Certain conditions apply, such as a minimum income, and many of the packages are structured to include the finances for transfer fees and other costs. Investigate all the options and shop around for the best interest rate, which will not necessarily be at your own bank.
Image: Neville Lockhart/Woman's Value