You’ve finally gotten the best investment property. Well done! Now, you’re left with getting your finances in check and then you propose an offer, isn’t it? Not really. Before rushing off to meet the sellers, you need to make sure that you’ve carefully regarded all the fees related to the purchase. Apart from the buying price, there are other frustrating undisclosed costs that are associated with investing in an estate. On the bright side, we’re here to assist you in this process. Likewise, take out your notepad, pen, and calculator and let’s get down to business.
5 Undisclosed costs to know about
Purchasing a house is a great financial commitment. If you’ve seriously decided to invest, then you need to be serious about assessing your budget. The five extra costs you need to budget for are outlined below:
Fees for inspection and appraisal
Though your ideal property can seem stunning outside, what does it look like inside? As such, you need a property inspector to help you assess it. Their job essentially involves looking at the heating, ventilation, the plumbing, electrical components and air conditioning (HVAC) system. To cut costs, why not do the inspection yourself, right? Don’t do it. It’s always recommended that you get an external party to do a property inspection. As professionals, these individuals have a trained eye to objectively identify things that you, as an investor, might have missed partly because you’re subjective. “For bond registration, the fee will always vary according to your home loan amount.”
Registering for property bond and transfer
After your home loan is approved and accepted, you’ll be required to make a payment to register the bond and transfer the estate. Although you will always have to pay to register the bond, the transfer cost only takes place if the property’s value is above R900 000. This cost can be intimidating (based on property value) but you pay once-off and as long as you’ve assigned part of your budget to it, you should be okay. The bond registration fee will always differ based on your bond amount. It’s depended upon tariffs suggested by the Law Society – but, this can change according to the law firm you use. For the sake of helping you budget, let’s say that the property and bond amount is R650 000.00. Excluding VAT, the projected fee is roughly R9 620.00. On a bond and property that’s worth R2 million, the amount is around R19 060.00 excl. VAT. If you’re buying property between R650 000 and R2 million, try to be mindful of these values. The transfer duty you can expect to pay is as follows:
| Property Value | Transfer Duty Fee |
| R900 001 to R1 250 000 | 3% of the value |
| R1 250 001 to R1 750 000 | 6% of the value above R1 250 000.00 PLUS a flat rate of R10 500 |
| R1 750 001 to R2 250 000 | 8% on the value above R1 750 000, PLUS a flat rate of R40 500 |
| R2 250 001 to R10 000 000 | 11% of the value above R2 250 000 PLUS R80 500 |
| R10 000 001 and above | 13% of the value exceeding R10 000 000 PLUS R933 000 |
For a more precise projected value, try using a bond registration and transfer duty calculator that can assist you to budget.
Taxes
While this term frightens most real estate investors, paying your taxes is a legal requirement. The type of tax that you’ll likely come across while investing is the Capital Gains Tax (CGT) and tax on your rental income. The great thing here is that there are tax-based incentives that you can make use of in order to save on these costs. Attend one of our free webinars to get more in-depth tips about tax.
Insurance
If you’re investing in property, it is important to have insurance. Even if you seek financial resources from the bank, they’ll advise you to take out insurance for your property. In the case of being unable to make monthly payments, the insurance will protect you. We suggest you take out rental insurance for a buy-to-let strategy. This is particularly helpful if you don’t have a tenant for a few months or become stuck with unruly tenants who don’t want to pay their rent.
Maintenance and repairs projects
Whatever your position, having either invested in distressed property or not, fixing and maintaining a property is vital. When searching for their ideal home, tenants look for something that’s almost perfect and matches their preferences – having a maintenance budget allows you to provide it. As an investor, it’s necessary to ensure that the property appears great on the inside and outside. This needs to happen before a tenant moves in or before the house is put up for sale.
Ways you can save on these additional costs
Sorry to disappoint you, but you still have to pay for all these costs. However, you don’t have to pay ridiculous fees and become broke while investing. To help with all the other costs, set aside an additional 8-20% above the buying price. As a way to help with the additional cost of investing. Some investors were able to save R100 000. Alternatively, you can use the tactic of negotiation – which is amongst the list of skills we teach at our property investment webinars. Did you know that even when you approach banks for financial resources, you can negotiate a better home loan offer? A majority of investment loans offer the complete property value price, and transfer duty fees are included.
So whatever concerns property investment, we’ve got you covered. From ways to negotiate to growing your property portfolio, our experts will share their knowledge and experience on how they started investing.
