Questions to ask before you buy a rental pool property
Category RealADVICE
With the holiday season approaching, many developers are getting ready to launch new hotel and resort projects that offer investors the opportunity to acquire a suite or even a whole apartment that they can use as holiday accommodation at certain times of the year and put into a rental pool for the rest of the time.
But before they commit to such purchases, buyers need to consider all the advantages and disadvantages, says Gerhard Kotzé, CEO of the RealNet property group. "Of course the biggest positive of putting your property in a rental pool is the potential for it to earn rental income when you're not using it, that will help to offset the costs of ownership such as bond payments, levies and maintenance.
"In addition, the property will usually be managed by the resort or hotel itself, which will provide all cleaning, maintenance, marketing and guest services, and relieve the owner of all the hassles of managing a holiday property."
Resort properties often also come with a range of on-site amenities like pools, spas, restaurants and fitness centers, which are not only attractive to buyers but also to potential renters, he notes.
"However, it's important to know that when your property is in a rental pool, you will most likely have very limited access to it, especially during peak rental seasons, so this may not be the right type of purchase if your main reason for buying an additional property is to have a family holiday home.
"In that case, you will probably be better off buying an ordinary sectional title or freehold home in your favoured holiday destination and working with an experienced local rental management agent to secure short-term tenants only when you are not using it."
Kotzé also points out that the rental income from a resort suite or apartment can be highly seasonal, depending on location, due to high demand at certain times of the year and lower occupancies during low season periods. "Consequently buyers in such developments should be looking for rental guarantees of a minimum per month or year - and should certainly not be reliant on that income to cover their bond repayments.
"You should also be aware that the income generated from the rental pool is typically shared between owners and that the resort management or property management company will usually also charge management fees. It is thus very important to understand the rental and fee structure and how this will affect your net income from the property."
Before making a decision, he says, it's also essential to thoroughly research the developer's track record as well as the financial status of the resort. "It is also really worthwhile to enlist the help of a property professional who specialises in holiday property investments to help you make an informed decision based on your specific circumstances and objectives."
Author: RealNet
