Know the true monthly cost of a townhouse before making an offer to buy
Townhouse living is becoming increasingly popular, especially among young buyers who want to enjoy the freedom and extra security it gives them.
“Buying a sectional title townhouse is also a great way for younger buyers to get a foothold in an upmarket area where the prices of freehold homes are beyond their current budget,” says Shaun Rademeyer, CEO of BetterBond.“However, compared to buying freehold property, there are quite a few additional factors to consider when buying into a community housing scheme such as a townhouse complex.”
According to Rademeyer one of the most important considerations is that you will not only own your home in the complex, but will also share ownership of all the common use areas such as hallways, lifts, gardens and recreational facilities – and share the financial responsibility for the upkeep and maintenance of these areas.
This means that you will have to pay a levy each month in addition to your bond repayment, and that you need to be sure that this is in your budget, especially if you intend to apply for a home loan.
“The banks will not approve your application if they don’t think you can comfortably afford both payments,” warns Rademeyer.
Just as important as knowing how much the levy is before buying is knowing what the levy is for. Rademeyer says that not many potential buyers know that many complexes don’t have separate water meters for each unit so the municipal charges for water use could be included in your levy.
The levy also typically includes your share of:
- The municipal rates applicable to the common property.
- The monthly premium for the bricks-and-mortar insurance that covers the whole property, including your unit.
- The security costs.
- The maintenance and upkeep of the grounds and building exteriors.
- The compulsory reserve fund for the complex.
Things to consider for a safer investment
Rademeyer suggests that you should look out for a complex that has a high percentage of owner-occupied and not tenant-occupied homes.
“Owners tend to demand a higher standard of maintenance, and are less likely to default on their levies, if they live in a complex themselves. This means that the complex will be well kept and that the value of your investment will be better protected. In addition, you are less likely to have to deal with noise, pet and parking problems.”
It is also essential that you must check the management rules applicable to the specific sectional title scheme you are interested in before you decide to buy a home there. Living in a community development means that one does not have unrestricted ownership privileges, and the rules of the complex may prohibit pets, or include certain restrictions when it comes to renting, renovating, or reselling your townhouse.
The size of the home and complex you buy into could have significant impact on resale value. Rademeyer says that, if you can afford it, a two-bedroom townhouse is generally a better choice than a one-bedroom, because it will be easier to resell when the time comes for you to move on.
As to the size of the complex, you need to be realistic about how involved you want to be in running it. A bigger complex might seem impersonal, but there should be more candidates to be elected as trustees, and more money to pay a professional managing agent, while a smaller complex will probably require more direct involvement on the part of the owners.