You might have come across an SA commercial on your net, TV or newspaper promising great returns on investments made on the property but tuned it out because it had the adjective commercial instead of residential. While it’s true that residential property is in high demand and a more affordable investment than its commercial counterpart, especially in the face of the shortage of houses and rising rents, the benefits of investing in a commercial property in South Africa are too good to be ignored at a time when the market for it is in the nation’s favour. This notion should be seriously considered for the following reasons:
Reasons To Invest In South Africa
South Africa is the most liberalised market in Africa which allows foreigners to purchase and own its lands, even the farmlands, without paying any taxes. Real estate developers are given 20 percent tax exemption and 20 percent more for renovating to properties for rent due to which commercial real estate market is flourishing even though it’s not doing well abroad. The international exchange rate favours dollars, euros and pounds against the rand which makes investments made here affordable. The economy of this African country is strong and stable. A fact that every SA commercial about estate likes to boast a lot about. It has been largely left untouched by terrorism which adds to its stability.
Moreover, this country is one of the hottest tourist destinations thanks to its wildlife, beaches, mountains and natural greenery. This means that there is a lot of scope for businesses like malls, hotels, restaurants, etc. The holiday season brings in even more travellers.
There is also a very high demand for real estate due to its shortage. The reason behind this shortage is the ever increasing demand for new homes which also affects the demands for business properties which means that a businessman would be willing to pay a lot for yours. To make the deal sweeter, most people prefer renting over buying buildings due to hikes in interest rates which means more profits on rental properties.
Reasons To Invest In Commercial Property
Unlike residential properties, commercial properties are not liable to the Prevention of Illegal Eviction (PIE) Act. Under PIE, if the tenant stops paying rent or is doing something dubious, the formalities required to evict the tenant from the residence could take very long. The tenant could stay at your place without paying for that time. But in the case of a commercial estate, the owner can shut down the shop if it doesn’t pay dues in a timely manner with the due formality that takes a shorter amount of time.
Moreover, leases for commercial properties last three to five years which means a long term and steady income for the owner. This is more steady than looking for new residents after every few months.
And Lastly, you would get much higher returns by purchasing a commercial property to rent it at 6 to 12 percent annually, than by renting rooms which would amount to 1 to 4 percent annual returns only.
Of course, the downsides of buying a commercial property to rent it to other businesses cannot be ignored. It’s risky, needs a large budget initially and lots and lots of management. You will find yourself juggling between multiple clients and agencies over public safety, maintenance costs and multiple leases. You could hire professional companies to do the management for some percent of your monthly income. Though, it’s not possible to be absent and earn profits from a rented commercial property, you must invest your time as well to get your money’s worth.