Buy-to-let Trend on the Increase

Buy-to-let investment in residential property is indeed on the increase, according to figures from the Rawson Property Group's sale franchises.


"The number of buyers now buying for investment purposes has almost doubled in one year, from 3,5% to 8% of the total," says Bill Rawson, chairman of the Rawson Property Group, "and there are clear indications that this trend is on the increase."


Three primary reasons

Asked to what he attributes this rise, Rawson says that there appear to be three main causes of the success of franchising.


The first, in his view, is the poor returns now being given by the money market: "Fixed deposit investments, the traditional haven for the unsophisticated investor, are now around 5,5%. This is not high enough to attract investors."


The second cause of the upswing, says Rawson, is the greatly improved rents now obtainable. This is most noticeable right now in Gauteng, where rental returns of 7-10% are now being achieved from the date of purchase.


Those going the buy-to-rent route, says Rawson, should follow the example of certain of the Rawson Property Group's long-established investors and make it a policy to pay back the bond at 10% or 20% above the agreed rate.


Thirdly, certain banks, he says, last year kept their bond repayments at the old 10,5% rate of a year ago after the standard rate had dropped to 8,5%, and had thereby done their clients a huge favour.


Such clients are building up a surplus which could be a very useful buffer if they hit hard times. If they simply continue to pay their bonds at the higher rate, it will enable them to pay them off in a far shorter period.


"We have large numbers of clients who, by being disciplined, pay off their bonds in ten years. In the buy-to-let field this is especially good practice," says Rawson.

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