BUYING a home is a great idea because it is the best way to build up your own personal savings – called capital.
When you rent a property, it is one on a month-to-month basis and when you move out that is the end.
Even if you have lived in a property for 10 years you will walk away with nothing.
Somebody who bought a house 10 years ago and then decides to sell will receive the net income from the sale – that is: the selling price, less the outstanding bond.
All that a tenant is doing is helping the owner of the property cover his monthly bond payments (if they have a bond) and creating capital value in the property over time.
It is far better to own your own home.
To give you an example, I bought my current home in 1975 for R18 000 and still stay there.
I have done some extensions to the original house by adding on a double garage, a bathroom and study and could now sell it for R2 000 000.
I no longer have a bond as I paid it off over the years (residential bonds are payable over 20 years) so apart from paying my rates and insurance I don’t have any expenses on my current home.
That makes living costs far lower and makes life easier.
What makes a good home to buy?
Firstly, you need to know how much you can afford.
Bond originators such as BondChoice will do that for you, free of charge, providing you supply them with the information that they need which includes your ID details, work details and copy of payslip and your other income and living expenses.
If you are married in community of property, your spouse’s details will also be needed.
If you are married out of community of property you can buy property in your own name without your spouse’s approval.
They will calculate how much bond you will be approved for.
The difference between the approved bond and the buying price plus the transfer and bond costs will have to be paid in cash.
When you know how much bond you will get and how much deposit you can afford you will then have the maximum price that you can pay for a home.
Houses that you look at have what is called the asking price.
Quite often the asking price is not the price that the seller will ultimately accept when a buyer makes an offer.
Thus you may well be looking at homes where the asking price is higher than what you can afford.
I would suggest not going about 10 percent over your buying price.
Well-priced houses may not be negotiable because they are put into the market at the right price and normally sell very quickly because buyers see value for money.
When you look at a potential home think about the following:
- Is the price close to what you can afford?
- Is the property in good condition or will it need work. Houses that are very neat and well looked after normally sell quickly for the actual asking price and sometimes for more where there are competitive buyers. But they don’t need any work done to them. Houses that are a bit tired or untidy, while needing some work, could possibly be bought for a lower price. You can do a lot for R20 000 if you do the work yourself. An untidy scruffy garden can quickly be put into good order, walls can be quickly painted. You need to make sure that there are no fundamental problems such as serious cracks or major roof problems. These are expensive to fix and often need a specialist to fix them. Cracks particularly are difficult to fix and may continue to be a problem into the future. Don’t worry too much about minor cracks, especially in Bloemfontein that has a lot of clay ground. My own house has had these sort of cracks since I moved in and they are still there but really are not a problem.
- Location is a big factor in the value of a property. Identical houses situated in Langenhoven Park and Ehrlich Park would have totally different prices. If you are on a budget you may get far better value for money say in General de Wet than Pentagon Park. The value of a location is also affected by such as how far from a school and shopping a property is. One that is close to a school could make it much more buyable to a young family than to a retired couple. Also consider things such as where the adults in the family work as you need to avoid having to commute too far to work and back. For this reason public transport can be important to some people who may need to look at taxi routes for example.
- Somewhat like location, the general condition of the area in which the home is situated is important. The condition of roads is important especially with township homes. Some roads are fairly good but I have come across roads in Botshabelo that I find really difficult to get over with my Navara bakkie. Even the main roads are not in good condition, which means that you need to have a bigger, stronger car than would be needed with normal roads and your service and tyre costs are likely to be heavy compared to normal road areas. How your neighbours live also determines the value of your new home. I don’t think that I would like to live next door to an illegal panel beater!
- One way to make a bargain buy is to know what is likely to happen to the area that you buy in over the next 10 years or so. For example, Willows is a suburb that used to be a family flat area before the Central University of Technology (CUT) expanded. Now it is a student area and all the families have moved out. There is a serious crime problem in the area and lots of student entertainment places have opened in the area. This has caused a noise and drinking problem. The chances of this changing in the next 10 years is very small as CUT is hardly likely to move out of the area. In fact, it is likely to expand and make the situation worse. On the other hand Vista Park is definitely going to expand with another 5 000 homes on the cards. These will be small but modern family homes and business sites. If you buy in the existing part of Vista Park, the chances are very good that prices will rise strongly with the new development. A junior and senior school are due to be built by the Academy of Excellence in the new section which will make the area more attractive.
There is no doubt that it is better in the medium and longer term to buy rather than to rent.
While it is cheaper to rent than buy initially, the benefits of buying very soon overtake renting.
- Mike Spencer is the founder of Platinum Global, a professional associated property valuer and consultant with work across the country as well as Eastern Europe and Australia. mike@platinumglobal.co.za
