Benefits of buying Sectional Title homes
The concept ‘sectional title’ describes the separate ownership of units or sections within a complex or development. When you buy into a sectional title complex, you purchase a section or sections together with an undivided share of the common property, which are known as units.
Investing in sectional title property has many advantages and should form part of any diligent investors’ property portfolio. The rental yields are generally higher, they are easy to maintain with no excessive outdoor spaces, generally located in desirable locations on the city fringe with access to amenities close by, and for new apartments, depreciation benefits are high which helps to reduce the holding cost to the investor.
Healthy Investment Returns
Even relatively conservative and low-yielding sectional title homes offer healthy returns compared to other asset classes, such as stocks and money market investments. Many investors are attracted to the cash flow from rental income, which, depending on how you finance and register your apartment, can be anywhere from a few percent to the mid-teens per year, calculated relative to your deposit. However, you’re also paying your loan instalments, and this adds to the return you’ll realise when you sell the property to release the equity. If you decide to repay the full loan and keep the property, you achieve an immediate increase in monthly income due to net rental received.
Living in close proximity to your neighbours and in a more communal environment is perceived by many to be more secure than living on a freehold property. Added to this, most sectional title developments, such as The Franklin, have excellent security around the perimeter and at the entrance of the development. With regards to freehold properties on the other hand, owners are entirely responsible for their own security – they need to pay to secure their own perimeter, and often for an armed response security company to patrol their area.
A fixed monthly cost
Unlike freehold properties, where the owners have to pay for their own home insurance and for the upkeep of the exterior of their homes, owners of sectional title units pay a monthly levy instead. The levy includes the following costs: insurance premiums, maintenance of the common property, wages and salaries of cleaners, security and other staff involved in maintaining the common property, as well as any water and electricity required for the common property.
As a result, owners of sectional title units only need to pay for their rates and taxes, the unit’s insurance, the contents of their home, and for their monthly electricity and water consumption. The costs of maintaining facilities in the development are shared, which contrasts with freehold property, where the owner is responsible for all costs.
Affordability and Communal Living
Generally speaking, a sectional title unit within a complex is more affordable than a freehold house. Also, on average, communities living in sectional title schemes boast close-knit communities and far greater interaction with their neighbours when compared to freehold neighbourhoods.
Sectional title units will continue to be popular among security conscious buyers in the future and provide a good return on investment if the principles of buying property are adhered to. This type of property provides a low-maintenance, cost-effective opportunity for buyers wanting to purchase property and take advantage of market conditions.
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