Housing acquisition options Flashcards
Renting as a housing acquisition option
Property owner - landlord/lessor
Tenant - renter/lessee
Unit should be inspected to ensure it suits the tenants needs and budget, make list of defects in the unit
Advantages of Renting
Pays fixed amount over specific period
Does not pay land and property tax
Is not responsible for property maintenance
Can run business from unit if they get permission from the owner/municipality
Both parties know what is expected of them - lease agreement
Easy to move after giving notice
Fewer monthly expenses than homeowner (homeowners insurance)
More affordable for people who can not build/buy a house
Disadvantages of Renting
Pay rent for years and still not own the property
Assests do not increase
If tenant spends money on property, property owner can decide if they want to pay the tenant back
Can be difficult to find a suitable property
Do not take same pride in maintaining property
Rent usually increases every year
Can not use rented property as security for a loan
Must comply with conditions of contract
Financial responsibilities when Renting
Usually pays a deposit as well as first month’s rent before moving in
Deposit can be equal to one month’s rent or more
Pay rent on a monthly basis, stipulated in contract
Depending on the lease agreement, tenant may be responsible for paying water, electricity and waste removal
Contractual responsibilities when Renting
Lease - legal document signed by both parties and witnesses
Lease stipulates rental conditions as well as tthe responsibilities/rights of both property owner and tenant
Lease includes -
Address and number of property
Signature of both tenant, property owner and witness
Date of when document is signed
Date when rental starts and length of lease
Details about lease renewal
Amount of rental installment, deposit amount, other expenses
Clauses that indicate rights/responsibilities of the tenant/property owner regarding deposit, water and electricity costs, sub-letting, pets, inspections of property and entry to unit by property owner
Building a house as a housing acquisition option
If you own a piece of land, can build own home
Plans must be submitted to municipality for approval before process can begin
Advantages of building a house
Can cost less than buying a house
Owner can design the house to suit their needs/taste
Latest designs/technology can be used
Create environmentally friendly house
Finished according to owner’s schedule
Not enough funds - building can be stopped for a while
Is an investment
Disadvantages of building a house
Risk of faulty construction/design
Can cost more than buying a home
Building work delayed - cause discomfort/stress
Managing project can be complicated
Can be time consuming
Quality control must be done - create/prevent problems
Unexpected expenses often not budgeted for
Expensive to start new garden
Financial responsibilities when building a home
Lot of costs - not always easy to estimate
Owner needs a plan of house they wish to build
Cheaper to have plan drawn up by a draughtsman
Plan must be submitted to municipality - fee is charged
Ask for quotations from different builders before deciding
Housing Consumers Protection Measures Act 95 of 1988 - builders and contractors must be registered with the NHBRC
Contractual responsibilities when building a home
Legal contract between builder and owner
Include:
Cost breakdown
Detailed description of materials and finishes
Exact dimensions of the house
Completion date
Dates and method of payment
Guarantees provided by the builder, penalties responsible for if contract is broken
Cancellation cause
Builder must register house with NHBRC
Buying a house as a housing acquisition option
Big financial decision - good investment
Asses potential houses carefully
Many different options are available
Full title - you own the whole property and the building
Sectional title - you own the building and the piece of land that it is on
Advantages of buying a full title house
Buyer is legal owner of the property
Can make changes to their property
Sense of security and independence - property can be used as security for a bank loan
Value of property increases over time
Disadvantages of buying a full title house
More expensive to buy than rent initially
Owner is responsible for maintenance and repairs
Owner is responsible for safety and security
Owner pays rates and taxes to local municipality
Owner pays pays capital gains on profit made from selling property
Bond repayment can be large amount of monthly income
Difficult to sell if need to move suddenly
Advantages of buying a sectional title house
Buyer is legal owner of property
Owner can make changes inside their property
Sense of security/independence - can be used as security for a loan
Value of property increases over time
Living in a complex can be safer than in a freestanding house
Owner can make use of common areas of complex
Less administration because body corporate administers the complex
Disadvantages of buying a sectional title house
Pay a levy every month
Levy increases yearly
Owner shares common areas with all owners
Must obtain permission from body corporate before making changes to the property
Bond repayment could be large amount of monthly income
Difficult to sell property if owner needs to move suddenly
