More and more people are ditching the idea of a free-standing home being the ultimate homeowner’s dream and are instead opting for purchases in free-standing complexes where sectional titles are available.
Consumers are attracted to the peace of mind that a secure residential community offers and experts say that buying a property like this isn’t a bad idea at all – whether you decide to rent it out or decide to live in it yourself.
Whichever decision you take, however, there will be pros and cons. Here are a few things to weigh up:
Pros of Buying a Sectional Title Property
(1) They show better standing power
From a homeowner’s point of view, the staying power of a residential estate is much stronger and performs better than a free-standing house.
And it usually performs better in terms of value, seeing as estates currently account for 22% of the market’s sales value, while unit sales stand around 14%.
(2) It is a more attractive prospect
From an investment perspective, sectional titles are a more attractive option, according to TNP-FNB Residential Yields Review.
Depending on the province the rental unit is located in, gross rental yields can produce stats like 8.8% for one bedroom properties, 9.2% for two bedroom properties and 9.01% for units with more than two bedrooms!
(3) It will cost you less
In general, sectional title properties will cost you less when purchasing and ditto with upkeep in terms of levies and day-to-day expenses. Plus, it will also mean a higher level of safety.
(4) General upkeep is shared
The responsibility of the general upkeep of the estate belongs to the Body Corporate with or without the help of a managing agent.
By sharing the load between members, the responsibility is lessened on the owners or tenants, while the overall estate can benefit from a wide range of skills and knowledge.
There are, however, some pitfalls as well…
Cons of Buying a Sectional Title Property
(1) The rules and regulations
Living in an estate means that you are sharing the property with a community of people.
There are rules and regulations you will have to adhere such as curfew for visitors, use of the communal areas, and the level of noise.
You’ll also be limited in terms of extending or expanding your unit!
(2) There might be disagreements
The problem many tenants find with shared responsibility is that not everyone agrees with each other all the time.
If the Body Corporate takes a vote on an issue, majority rules, even if you disagree and the decision might potentially lessen your investment.
(3) The owner-to-tenant ratio
An aspect you should be looking at is the owner-to-tenant ratio. Ideally, you should ideally aim for an estate where owners live in their own units.
Owners are more likely to look after and maintain their units better than tenants and this will maintain the value of your own property.
(4) Insist on seeing the scheme’s accounts
Experts note that the best piece of advice that they could give buyers who are looking to invest in an estate is to demand to see the scheme’s financial accounts. They are by law obliged to let you see it. If you are not able to understand it, you should check them carefully with an accountant.
Experts warn against estates with too many tenants for the exact same reason as the above: owners will more likely protect and look after their investment.
Whichever choice you decide to make, sectional title properties are a huge investment. Therefore, you should consult someone with appropriate knowledge before you jump right in and buy property.
What are your experiences with buying a sectional title property? Any stories you’d like to share with us in the comments below?