Investing in rental markets

For property investors, there are certain markets which promise a higher probability of secure rental returns than others.

10 March 2019 | Economics

Student accommodation, lock-up-and-go sectional titles within central business districts, and holiday markets are just a few options savvy real estate investors have available to them, says regional director and CEO of RE/MAX Southern Africa, Adrian Goslett. “Each of these markets have their own unique draw cards and corresponding downsides. Ultimately, it is up to the investor to decide upon which of these markets is best suited for his / her risk appetite.”

To help investors decide which market is more appealing to their purchasing criteria, Goslett explains the various pros and cons of each market:

Holiday markets

“Best suited for those who are flexible regarding the lease term, holiday markets offer great investment potential for those who would like to tap into the foreign market. Properties located in sought-after tourist spots are less affected by the volatility of the rand and offer the potential for higher returns than any other market. However, as with any investment, the higher the return, the higher the risk. During off-peak seasons, properties in these markets have a much higher potential to stand vacant for periods of time.”

Student markets

“Demand in these areas will always be high, but there is also a high turnover rate in terms of tenants. What’s more, it is advisable to hire somebody to manage the property on an investor’s behalf to ensure that the property is well-maintained, as the risk for damage and neglect increases when leasing to students.”

Business district markets

“There will always be a market for working professionals who are looking for easy access to the CBD. Investors will need to keep a close eye on the market and the economy to ensure that their rates are fair, as affordability is often the main reason why properties remain vacant in these kinds of suburbs. For comparative advice, a real estate professional can provide insight into any potential new developments which could affect the pricing of rentals in the immediate surrounds.”

As a final piece of advice, Goslett encourages investors that property is and always will be one of the surest ways to generate high and stable returns.

“While stock markets fluctuate daily, property markets remain relatively stable over time and appreciate in value. The question should never be whether you should invest in property, but rather where you should invest in property. And, most often the answer to this question can be found simply by consulting with a reputable real estate professional who can point you in the right direction,” Goslett concludes.

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