Case study One:
Two years ago, Lauren W* (23) began her search for a property. She had specific requirements: a Sectional Title in the Northriding, Johannesburg area: minimum 2-beds, private garden, and under R1-million. A special requirement was for natural light as she is an artist. Her search began online, took two months, and she viewed 10 properties in total.
Lauren made a cash offer on a property advertised by RE/MAX on Private Property. The agent advised that the seller would not consider anything under R850 000, which Lauren agreed to, giving two weeks for acceptance. Occupation and title deed followed, three months later.
Lauren was comfortable with the property buying process but not entirely impressed with the agent, who had not picked up that the seller had made very obvious and unprofessional improvements to a damp problem in the flat. Lauren, with some assistance from the conveyancers needed to tackle this herself, which two years later is still not resolved. Lauren also felt the agent did not provide much hand-holding, and surprisingly, not one of the agents of all 10 properties viewed, asked her what her requirements were.
Case study Two:
Giles G* (29) searched for a small agricultural holding in Mpumalanga. He wanted to reside as close to the Hoedspruit area as possible, have enough land - up to 21 hectares - to explore permaculture and animal husbandry, and with at least a home big enough to accommodate he and his girlfriend, and his mother and father. His parents were to subsidise the property purchase with an overall budget of R2-million.
Giles, after two years of searching, made an offer on a property worth R2.5-million. He found the property himself despite engaging the services of all the property agents/agencies in the area. It had two homes, one being the farmstead, the other a cottage. There were some hiccups getting the property into his name, but despite frustrations at the time, he is now enjoying his new lifestyle and his commercial farming enterprise.
Passive income driver
The youth-buying-property market is an ever-changing environment, obviously because with each year that passes, age increases and lifestyles change. Lightstone indicates that the youth though, are really starting to see the value in investment properties, and while this market is somewhat small, most that do it, are repeat buyers (15,3%), indicating that they are likely considering growing a property portfolio.
Buying a small flat today, and securing a rental that covers the home loan, means that at some point there will be enough equity to use to buy another property, perhaps a larger unit or even a freestanding house. This cycle appeals to the youth because at some point the properties will be paying for themselves and will then provide a passive income.
Freedom
For the young nomad that doesn’t' want to be tied down to living in one region, a property purchase is an ideal solution. They still own property, but can live wherever they choose, even if that does mean renting themselves. They reap the advantages of owning an asset that is being financially covered by rental.
Another trend among the youth is that they buy a property, live in it but rent out a portion to a friend, a student, or a peer. In this way they have control over the rental income whilst still able to protect the home from any tenant damage. Rules imposed must be obeyed by all that live under the roof, and this includes the owner.
Co-investment
Some youth are even co-investing with a friend, even a family member. Buying a property together can, however, be fraught with challenges, but as is noted, keeping business apart from personal relationships can be lucrative. Here you may find a contract is required clearly outlining what will happen in the event of a dispute, or if one of the parties wishes to sell their portion. This will also cover the how’s and who’s of how a home loan is managed, and the type of agreement should one party default on payments.
The most important aspect to the youth selling or buying properties is knowledge around the property market. Very often the idea of earning a passive income through property investment far outweighs rational thinking. This means they need a lot of handholding, be that from trusted advisors like parents, friends and other family members or reading about property online. They should also consider spending some time talking to property practitioner’s who will be able to guide them in their purchases.
Buy-to-live
The youth generally have very clear ideas on where they want to live, and the type of property they want to acquire. There are expectations that have to be managed, including that with interest rate changes, affordability may change in the future. Again, the experienced and knowledgable property practitioner can play a crucial role in being a trusted advisor, which also ensures future repeat business.
- Names changed.
