‘Refurbish-to-let’: The latest trend in buying-to-let. As rising property prices push down rental returns, more landlords are trying to profit from refurbishments.
South Africa’s growing army of landlords are battling to maintain returns in the face of rising property prices. An almost certain increase in interest rates over the coming months isn’t helping. As a result, many are turning to refurbishments as a way of boosting returns. The strategy involves buying run-down properties and quickly increasing the value by undertaking a radical refurbishment. Just Invest, the investment arm of the Just Property Group has seen how landlords are now hoping to buy property in need of major work, with the intention of undertaking drastic refurbishment, before putting it on the rental market.
Refurbishment not only increases the value of an investment, but also cuts down on long-term maintenance costs and attracts higher-quality tenants who tend to stay for longer. Traditionally most investors wanting to refurbish would pay cash or, especially where they have large portfolios, raise a bond on one property in order to pay upfront to refurbish the next. Once that project is complete they raise a loan against it, and so on.
By Jason Vorster, National Sales Manager at Just Invest