How do you get into the property investment Co-ownership is a great way for multiple people to invest in property, with the intention of “flipping it” or selling it on and sharing the profit. It is becoming increasingly common in South Africa. Due to the economic climate, it can be challenging to enter the market, especially as a first-time buyer. | |
As a result, more people are choosing to purchase property with a friend, family member or even a colleague. Woodstock, Observatory and Salt River offer many such opportunities. “Fixer-uppers, distressed sales and properties that go on auction are popular amongst the investors looking to flip properties. Often savvy investors also approach sellers who have had their properties on the market for many months in the hopes of getting a bargain. Like all property buyers, co-owners have the option of taking out a bond on the property or paying cash. Shares in the property can be split according to each party’s contribution – one party may take 40% ownership and the other 60% of the single property. Such share arrangements can be recorded and registered on the title deeds by the Deeds Office. It is therefore very important to agree and stipulate the share-holdings of each owner before acquiring the property. Failure to stipulate the share-holdings will result in the legal presumption that the co-owners acquired the property in equal shares (50%/50%). Co-owners should discuss the following points before acquiring a property:
Most of the issues listed above can be dealt with or addressed by drafting a co-ownership agreement. It’s a good idea to discuss this with an attorney – although it might initially cost you a little bit more to get all of your paperwork in order, it could save you a lot of money in legal costs should a dispute arise and you don’t have an agreement in place. In such cases, the court will consider all circumstances and make a ruling as to what is fair and reasonable. When the dispute involves the proceeds of a sale, the court will consider all contributions made by each co-owner, whether it be rates and taxes, maintenance payments etc. The court will also consider any benefit the co-owners have enjoyed, such as staying in the property with a preferential rental arrangement. Other factors to consider include:
Do your homework if you’re considering purchasing a property to flip. Do some research on the various property platforms and set alerts for yourself in the price ranges and areas that interest you. If you are not familiar with the current market trends or even where to start, speak to an agent that specialises in a specific area and has experience in flipping properties. Once you’ve found the right property, determine whether the property you are purchasing requires special permits from council for the renovations. Decide whether you will monitor the renovations yourself or employ a property manager. Then establish a list of trusted contractors you will be happy to work with. Ask them if there are time frames for your renovations and whether they’ll work over the weekends to meet these. Start budgeting for the necessary repairs, the number of months that the property will be vacant, keep some money in the kitty to cover potential delays in the renovation process, finding a tenant or selling the property sold. How long before one can expect to sell the property? The trends to come out of that survey showed that, on average, a property is on the market for about 15.3 weeks before being sold, around 10 serious viewers will visit the property before it sells, and there is an average drop of 9.4% in the asking price. The average selling prices for suitable “flip” properties range from just under R1m to around R1.8m. Based on the 2019 Lightstone Seminar, the average transaction price for a freehold property is R1 819 313 and for sectional title R1 966 912. If you and your co-owner/s are serious investors and ready to sell, I would recommend employing a sales agent who is an expert in your area. They will provide you with the necessary area statistics in order to prepare you for what can be expected. Cape Town is unique in the sense that the areas are very diverse. You can range from lower-income areas such as Maitland and Brooklyn to the desirable suburbs of Bantry Bay. And the prices vary accordingly. | |
Courtesy of Private Property & Chelsea Viljoen of Just Property |