'Toti emerging as investment hot spot

Amanzimtoti is the gateway to the south coast of KwaZulu-Natal and has been booming this year in terms of demand for holiday accommodation to let, especially during the school holidays, Easter and the spate of long weekends during March and April.

Eric Morkot of leading local agency Nationlink Amanzimtoti says that two bedroom flats for sale on the beachfront (the traditional holiday strip) are consequently few and far between, with fully furnished 75sqm units selling at R850 000. "A good apartment block with a well established rental pool is providing a 5% return at these prices," he notes.

An interesting dynamic that Nationlink Amanzimtoti has experienced is the shortage of holiday rental stock due to more units being occupied on a permanent basis, which is ultimately pushing up rental rates. "For this reason, a steady increase in rental returns is expected. With the market prices rising in excess of 12.5% over the past year and prices expected to continue growing at this rate, holiday homes in Amanzimtoti make for a solid long term investment," says Morkot.

Nationlink has also been involved with several new developments in the Amanzimtoti area where units have been purchased and resold shortly after the development has been completed and he notes that by far the majority have sold for more than the purchase price, providing buyers with an excellent return on their investment.

"In the block Escalier situated on the beachfront, launch prices off-plan started at R599 000, and within 12 months - during the construction phase - they had reached the R1m mark. It is now four months since the completion of the 100sqm units and the handover selling price is R1,3m.".

Nationlink has also just completed the apartment block Lagoon Point, consisting of 18 luxury executive flats originally sold off-plan at R1,4m for 230sqm. These flats are now selling at R2,5m. "Once again the investor has seen an excellent return on what would have been a 10% deposit on the original purchase price," says Morkot.

The peak holiday periods for Amanzimtoti are the Easter holidays in March/ April and the Christmas / New Year period. Morkot says that investors who purchase flats in holiday apartment blocks will profit during these high seasons. "Prices range from R1200 a day to rent out an entire home to R800 a day for a three bedroom unit, and R600 a day for two bedroom units."

Renting privately can however involve unforeseen difficulties. Obviously property owners would prefer to save on paying the agent's commission, but by cutting this corner, the owner is left with the responsibility of attending to all daily management issues such as servicing, maintenance and collections.

"This can be really problematic especially when the property is far from the owner's primary home. It is better to deal with an experienced letting agent and ensure that there is someone handling the property who has the necessary expertise to deal with the various problems that can arise," says Morkot.

"Placing the property with a reputable letting agent who runs a rental office also ensures that the property will be occupied on a regular basis, and that its condition will be monitored."

When a buyer is planning to purchase a home for investment purposes it is also important to remember that purchasing a home in the right area is crucial to the future investment potential of the property, as this usually sets the rental rate. "If the property is in the wrong area and the rental is too high, the agent will have difficulty in securing tenants, which will eventually result in a loss for the owner. Rental properties also need to be of a good standard, as tenants believe that if they are paying the relevant rental, they should be able to expect the relevant facilities," says Morkot.

If the property is run down and needs work, the rental would need to be reduced to compensate for this. "And then the owner might not receive the type of return he is expecting so it is important to always keep the property well maintained."