Want to start your property investment story?
Most new investors find the idea of large financial commitments and investments intimidating. But with the industry-leading Absa Buy to Let Home Loan, you don’t need to be afraid to start your property investment story.
Simply put, the Absa Buy to Let Home Loan enables you to buy property that you can then rent out to tenants.
This savvy investment strategy has been used by experienced investors for years. The good news?
It’s accessible to everyone with the industry-leading Absa Buy to Let offering, which goes beyond simply giving you a loan for your investment property.
It also makes property investment an attainable path towards creating wealth – something most of us strive to achieve.
Why is Absa’s Buy to Let Home Loan industry-leading?
Our Buy to Let Home Loans are specifically tailored to bring investors more value than those traditionally offered by other banks. The inclusion of estimated, market-related future rental income in the affordability assessment is particularly beneficial for investors who already have one investment property.
Additionally, other banks don’t offer other value-added products to help investors manage and protect their residential property investment portfolios either.
These products from our Tenant Profile Network (TPN) and SA Property Investors Network (SAPIN) partners are unpacked further below.
What to do before buying to invest
- Know the basics
Before you make the leap and decide which property you want to buy, you need to learn more about property investment. We recommend reading books and looking at online sources, including property investment and purchasing sites.
Absa also offers various free resources that are designed to enrich your investment knowledge. Access them here.
Our key tip is that you have to understand how your monthly bond repayment is linked to the prime rate. If interest rates increase, consider whether your investment is still profitable.
Conduct stress tests by thinking of potential future scenarios and weighing up the different outcomes.
You can do this by using the Absa Home Loans calculator.
As Daniel Kazadi, Investment Coach at SAPIN and Executive Board Member of the South African Youth in Property Association (SAYIPA), notes: “Conducting this analysis helps to ensure that your investment remains viable under varying economic conditions”.
- Reach out to others
Talk to as many people as possible who have knowledge about the property industry.
This includes anyone from estate agents to seasoned investors who have an entire portfolio under their belt and those involved in letting.
Experts like SAPIN’s Kazadi are just one of the many resourceful partnerships to which Absa Home Loans has access in its network of property investors. You’ll be surprised to find out how many people are willing to help you on your property investment journey.
- Broaden your property investment knowledge
Absa Buy to Let customers can access SAPIN’s Property Accelerator Course and six-month Foundation Membership (both free of charge) to get extra educational value.
Visit SA Property Investors Network for more information.
- Research, research, research!
After you’ve familiarised yourself with the basic knowledge surrounding property investments, it’s time to dive into the specifics. Research everything – and we mean everything – about the property you intend to buy.
Consider the area where the property is located and whether it is experiencing new growth. Also think about nearby amenities, safety levels and public transport.
You should be thinking about your property as it is now as well as what it will look like in the future.
- Crunch the numbers
Knowing your numbers is the foundation of your success.
Work out all potential costs, including utilities, monthly maintenance, levies (if applicable), purchase price, rates and taxes, monthly bond repayments and cash required for deposits, transfer duties, transfer fees and renovations.
There are also pivotal financial questions that you should be asking yourself, such as:
- How could interest rates potentially increase, and what impact could this have on my monthly bond repayments?
- If my tenant defaults on their rental payment, do I have extra income to keep me afloat until I can find a new tenant?
Get access to a loan-to-value amount of up to 100%, maximising your purchasing power for that investment property. Visit us here for more information.
- Participate in sectional title properties
If you’re a new investor looking to purchase a sectional title property, ensure that you’re active in your newly acquired property’s governance. Look to become a trustee on the board of trustees or join the body corporate.
This will give you significant power and say in the decision-making process governing how the property is managed, specifically in terms of levies.
Poor management can reduce the overall value of your property when the time comes to sell, particularly if levies are unreasonably high.
- Think about the timeframe
Keep in mind timeframes for your cashflow to be positive. Also consider how long renovations or improvements would take.
Finally, the timeframe before you sell your property should be considered as this can impact your capital gains tax.
Connect with our financial advisers to ensure that your investment strategy is on the right path.
Important factors to consider as soon as you’ve purchased an investment property:
1. Reducing risk with rental insurance
The monthly income that you get from your Buy to Let property comes from tenants. So what happens when they don’t or can’t pay you? You start losing money.
What’s more, legal processes must be strictly followed if you proceed with an eviction process. To reduce this risk, experienced investors take out rental insurance.
Absa Buy to Let customers have access to legal assistance through Absa Law For You whenever needed, with tailor-made packages. Visit absa.co.za for more information.
As Kazadi explains, “Tenant default insurance covers rent non-payment for up to four months, any damages caused by tenants and the costs associated with following the legal eviction process. By securing rental insurance, you can protect your investment and handle tenant issues more efficiently and legally.”
2. Tenant screening and management
These are also pivotal elements in reducing risk. As a new investor, we highly recommend that you opt to use the services offered by specialised companies instead of trying the self-management route.
Absa account holders can get a discount from TPN (a rental credit bureau) to assess potential tenants and manage their rental portfolio.
TPN solutions provide suburb-specific rental data, screening of potential tenants and access to the latest lease agreements to manage your property portfolio.
We’ve negotiated discounted rates with TPN on behalf of Absa customers for selected offerings, such as:
- TPN Residential LeasePack: Provides a comprehensive set of documents, including up-to-date leases. According to Waldo Marcus, Industry Principal at TPN from MRI Real Estate Software, these are the most widely used lease templates in the country, as they are both cost-effective and compliant with the latest industry regulations.
- TPN InvestorReport: Informs you of everything you need to know about a suburb’s rental market dynamics to support your residential property investment decision. The report includes demographic information, a rental price index and good-standing rental indicators linked to a specific area. To find out more, visit TPN.
What you need to know about your Absa Buy to Let Home Loan
Finally, it’s important to note that not all investments may work out the way we hope. This is perfectly normal; however, it makes having a built-in exit strategy essential.
Consider how you could change your strategy or whether selling the property for a profit is viable.
With the industry-leading Absa Buy to Let Home Loan, investing in property is simplified. This is your chance to make informed decisions and navigate the property market with confidence. It’s time to make big moves, together!
We believe in your property investment story.
Apply now to start your first property investment chapter with us.
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