Ways of Unlocking the Value in Your Second Property
10 December 2020
A primary residence is considered the home used for personal use; in other words the home you most regularly live in. A second home is a one you don’t live in full-time. This could be a holiday home, a flat you commute to occasionally in another city, one your university children use, or an investment property. Paul Stevens, CEO of Just Property, gives the inside track on when to sell, how to sell and whether to sell now.
- Is there a market for holiday homes now?
The market is most buoyant in the first-time buyers arena and the economy is in distress right now, so the market for holiday homes is most definitely impacted. St Francis Bay in the Eastern Cape currently has more than 1 100 (out of 3628 available) properties for sale and has had only 252 transfers in the last year, Margate on the KZN South Coast has more than 4 000 properties for sale (out of 14 557 available) and has had only 923 transfers in the last year. The market for holiday homes appears to be far from buoyant and I expect this to remain the status quo for some time still. For many holiday towns, it remains a buyers’ market.
- What is the best time of the year to sell a holiday home?
South Africa’s moderate climate means that properties can be showcased throughout the year. That said, it is always a good idea to market your holiday home during the season, whether it be the Easter, July or Christmas holidays when people take extended breaks and there is an influx of people into your area. Coastal towns like Margate and Struisbaai are examples of towns where the holiday season brings significant numbers of visitors.
- How should you sell a holiday home?
Short-term rentals provide an opportunity to market in a “try-before-you-buy” manner, giving prospective buyers a unique opportunity to get a good sense of a property before they commit to buying it. But remember that there are risks associated with letting people stay in your property. It’s a good idea to leverage a platform like Airbnb that screens guests, allows them to be rated and provides you with insurance against damage/ loss. You can also choose an agent to manage the rentals for you. Just choose the right property agent.
It's not easy to choose someone to represent you when it comes to buying or letting your property. Everyone promises the same thing: a quick deal, the best price, value and services you can trust. These are the core services our sales agents offer sellers:
- A dedicated network of resources to deliver across multiple service areas
- Correct pricing to secure the best price in the shortest time
- A wide tenant network to source potential buyers
- Stand-out marketing to attract buyers’ attention
- Pre-screening to bring you qualified buyers
- Diligence to protect your sale through to transfer
Our best agents go the extra mile and leverage community events to market themselves and, through them, the properties they have available e.g. making sure that they have a presence at beach walks, paddling races and hikes. Selling a holiday home requires that the lifestyle advantages of the holiday homes and their locations are brought to life, so that must dominate the marketing efforts.
- With the season here, should I rather rent it out and sell later next year?
This depends on a number of factors, including your reasons for selling, your sense of urgency to sell and your rental prospects in the near future. It would be best to consult a local area expert who can speak specifically about the market conditions where your property is located and who can advise you within the context of your circumstances.
YOUR OWN COMMUTER/STUDENT FLAT:
- What is the best way to market such a property?
Our best agents are able to clearly articulate the value of a commuter/ student flat to prospective buyers. In this case, ease of access to transport routes, good internet access and security are likely to be key. There is a seasonality to the demand for student accommodation, so when the property is marketed should be carefully considered. Factor in the time it takes to transfer ownership and for refurbishments to be done before it goes to market. There is less seasonality with regard to the commuter market as contracts terminate and begin throughout the year.
- Should I sell it in the current climate?
I’d like to quote Shaun Dubois, Just Property Pietermaritzburg franchisee – he puts it really well: “Have you heard the saying, ‘Don't wait to buy real estate, buy real estate and wait’? Property should rarely be sold and is a long-term investment. If it is held in a trust it can be very expensive to sell. Property is unique in that a tenant will pay most of your bond for you, and one day you will have a paid-up asset. Compare this to other asset classes where you would need to fund the purchase entirely from your own pocket. The fact that banks provide bonds for property unlike other assets further confirms the beauty of holding property.”
- What about renting it out?
Many landlords will be wondering if it’s worth it in the current climate. It certainly is. Over time, carefully chosen and managed investment properties provide long-term income and value. Get the best legal advice you can afford, and appoint a letting agent to vet prospective guests/ tenants and manage your investment property for you. Here’s what you should demand from your rental agent:
- Correct pricing to attract quality tenants and avoid extended vacancy periods
- Stand out marketing to drive immediate occupancy
- Strict vetting of tenants to mitigate risk
- Diligent property management to protect your asset & income & YOU
- Cloud-based systems to drive efficiencies & transparency
- Firm but fair dispute handling to move forward amicably
- If possible, should I try to acquire business rights in order to get a higher price when I sell?
Properties in prime commercial areas can attract a higher selling price if they are zoned for business rights. The rezoning process can be protracted, so owners are cautioned against expecting a quick win. Speak to a well-respected commercial property broker to understand the opportunities and possible roadblocks.
- What are the challenges landlords have faced this year?
Just Property’s experience has been the same as that of the rest of the market: higher than normal vacancies, with commercial tenants battling to meet their rent obligations. Residential tenant payments have slipped too but Just Property has been able to consistently outperform the other property management agencies, securing fewer vacancies and fewer defaulting tenants. Some of our landlords may find our vetting criteria strict but they have been rewarded too.
Our client feedback and reviews show that clients need their managing agents to be honest with them, now more than ever. Emotions are fraught, people are on edge emotionally and financially, and they want accountability. These are not unreasonable demands. Underpinning great customer relationships is the element of trust. For us, trust manifests itself in peace of mind - that sense of relaxing, knowing that you are in good hands. If our clients can say that we give them peace of mind in an otherwise chaotic world, we will know that we have delivered on our value proposition.
For more information on Just Property please visit www.just.property or call (087) 550 2258.
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