Buy-to-let: How Much Rental Increase Is Realistic?
Do you increase your rental on your buy-to-let properties and how much
?According to some banks the rental market has shown some mild strengthening in the last year. It is a well known fact that during tough economic times, more people have to rent and fewer people are able to buy their own homes. Worldwide the affordability of buying your own home has been affected by various factors.
Due to the world wide economic uncertainty banks are still reluctant to lend money and often require deposits of up to 10% of the purchase price. Few people are able to afford this and therefore have to rent while saving up for a deposit. Other factors which contribute to fewer people being able to buy their own homes are increased electricity costs, increased rates and taxes of municipalities, increases in fuel costs, medical aid costs etc. Many people are also still listed at the credit bureaus due to defaulting on their debt and cannot obtain finance. All these factors contribute to people having no option but to rent a home.
This is actually good news for property investors. The rules of supply and demand dictate that rentals will increase during these times. Because developers are also unable to obtain finance for new projects, fewer units are coming onto the market. These facts are supported by statistics which indicate that the average rental increase for flats grew from 6% in 2010 to 8.3% in 2011.
This means that for the typical entry level property you should increase your rent by at least 8% when your next rental increase is due. We expect that we will be getting close to 10% increases again some time during the middle of next year.
In our experience we have found that there is a huge queue of potential tenants when you advertise a vacancy in a typical entry level property. Don't be afraid to increase your rentals annually by the suggested percentage. If you have to get a new tenant, this is also an opportunity for you to increase your rentals to a market related rent. Just remember to get your rental agent to screen your tenants properly.Buying Your First Investment Property
This is often the most important decision you will ever make. However some might feel that this is also one of the scariest decisions you will have to make.
Most people are afraid of the unknown. Many are also so scared to make mistakes that they would rather not make any decision at all. This is of course the worst possible decision to make: not make a decision to buy an approved property.
Seasoned investors know that once you have bought the first property and have experienced that it is actually really simple; buying investment properties can be rather addictive! Then they must watch for "over indulgence". Typically during a downswing of the economy with higher interest rates this over indulgence can cause some stress and indigestion.
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