Thread by @n2a2o_jay

First Time Property Buyers

Part 2: Ongoing Property Ownership Costs

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Yesterday we covered property purchase costs. Now that you have fully prepared for the once-off costs of property ownership.

We will focus on the most important aspect: Ongoing costs of property ownership, for most people this cost will be for 20 years

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These costs are hugely impacted by the type of property you choose. There are four main property types in South Africa: Freehold, Sectional Title, Leasehold, and Shareblock. I will define the first 3, the fourth one is usually for property investors.

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Freehold – This title means that you own a piece of land, with everything on it. You’re required to pay rates to the municipality based on the value of the land and buildings.

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Sectional Title – If you’re looking to purchase a townhouse or flat, this is the title you’ll have. It means that you own the inside of the building, and land allocated to you, while common grounds are shared spaces. A Body Corporate made up of owners, runs the SS.

99 Year Leasehold – In this case, you never own the property outright. Instead, you lease the land from the owner for a period of 99 years. If you are buying the land from an existing owner, you’ll buy what is left/or extention in years on the lease. eg Waterfall Estate!!!

Freehold Ongoing Costs

This is the cheapest form of property wrt ongoing costs. you pay: bond, municipal rates & taxes, water & electricity, even security systems. For most South Africans this is the go-to when buying a house. There remains a worry in terms of crime & safety.

Before you purchase in an area, for at least a week. Go to that area at night, morning & day. Experience the "vibe"

For crime stats use crimestats.co.za, the report for an area will show total reported cases and a breakdown of types of crime, look out for house robberies

Sectional Title Ongoing Costs

Costs here are in the form of Levies, rates & taxes, bond. these properties are in an estate, with shared facilities. The most important aspect is the shared costs. In an estate with security guards, clubhouse, swimming pool, and playgrounds,

All owners in the estate will have access to these and thus will each contribute to the maintenance of these facilities. it is cheaper to "pool funds together" and pay as a collective. individually a pool, jungle gym, and security may cost you more.

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Another advantage is lock up and go lifestyle. because of the nature of this property. you can wake up and go on a holiday without fully worrying about a burglary or maintenance of your garden. This will all be taken care of in your absence.

The HOA are mini-gods. you cannot just wake up and modify your house without their written permission

Sometimes they impose special levies for maintenance work such as painting.They decide if the estate allows pets or not, & types of pets. its like boarding school but for adults

On average, in cities, townhouse levies vary between R1500-R2000 a month. If your bond is R6000, and rates are R500. your total monthly costs are R8 500.

If the house is a freestanding title: you may pay R6500 for bond and rates excl security, some have it some do not

Freestanding homes may seem cheap, but when you factor in Lifestyle(enclosed environment), security, well-maintained property, a sectional title may be a good alternative.

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Another alternative, which is my personal favorite, is Full title homes within an estate. you own your house and stand, yet you enjoy the benefits of estate living. In this set-up, you are liable for HOA fees, for shared services such as security. these fees are usually low.

The worst form of sectional titles in terms of costs is a Sectional Scheme within an Estate. Here you pay SS Levies and HOA fees as well. a law came into effect that SS should have Reserve Funds, most SS increased levies. some SS HOA eat the money and rundown the estate into debt

By the way: if you do not pay your Levies & HOA fees, the estate may get a court order to auction your house to recover costs, I have seen this happen to a lady left with 3 years to pay off her bond.

20 years is a long time, think carefully when buying!

Waterfall Estate is a 99-year Leasehold- within an Estate. You pay for levies, rates, and taxes, and you are renting this land for 99 years. When you sell, the development gets 3.5%, the municipality gets 5% of the purchase value.

But yona inhle shem!

Ultimately it all comes down to your lifestyle needs and affordability. Crime remains the main advocate for many South Africans to move into Estate living. Also, the more affluent the suburb, the higher the rates and taxes payable.

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If you have a home loan, you are required to have life insurance. Never take Homeloan insurance from the bank, it is linked to your Bond, when you finish paying, it's GONE! Rather take a separate life cover and cede a portion of it towards your home loan
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Lastly! There is Home contents insurance, this may be a good cover to have in case of a break-in,but they will make you go through a lot with their security requirements, installing security systems. May not pay if it was not functional. Hai: same Whatsapp group le car insurance

Whether you're Buying or Selling

Work with a Property Professional who has your Best Interests at heart.

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Best Regards,
Nthato Realty