Investing in property seems to be top of mind at the moment with everyone wondering if it’s still
a great investment considering the recent rate hikes and the potential for more. When you’re
considering buying an investment property, you should be thinking longer-term unless, of
course, you’re wanting to renovate and resell.
Thanks to all the TV shows, we tend to think that flipping houses is easy, but it comes with a
multitude of risks. Let’s be honest, anyone who has renovated their own home knows the budget
is rarely stuck to and it often takes longer than expected.
Buy-to-let strategies are the ideal way to invest in the South African property market. As with any
investment, there are inherent risks but when it comes to property, the advantages outweigh the
Investing in property can be a great investment, as not only do you have a tangible asset, but you
can also take advantage of an annuity-type income once the property has been paid for. Property
investment is the perfect retirement type product – if you buy the right property and are in for
the long-term. Your tenants contribute and hopefully cover your bond payments. In other words,
they are helping pay for your asset!
This is the best of both worlds, the outstanding balance of your bond decreases while your
property’s value and the rental income you receive, increases. As with any investment, you want
to have options and the property market provides exactly that. You may decide to sell the
property so that you can access the capital or keep the property and take advantage of the
monthly rental income.
It’ s all about yield!
It’ s always important to remember this is an investment, so the first factor to take into
consideration is what yield you will be earning. The yield is easily calculated as it is simply the
annual rent you receive from the property, less expenses, divided by its value and expressed as a
For example, a house worth R1 million where the annual rent, less expenses earned, is R120 000
i.e. R10 000 per month, the property would yield 12%. You can easily compare this to property
rentals and values within the area you are potentially investing in, to get an idea of the
prospective rental yield of the area.
What to buy??
The next key factor is what to buy, back in 2020, one bedroom and studio apartments were
reported to have been the best performers since 2008 and this trend is likely to continue. Having
said that, the pandemic has changed the way we look at the world and the semigration trend has
taken off – larger properties and scenic vistas have become sought after as the work-from-home
model seems set to stay.
But at the end of the day location is key and depending on your target market there are other
factors to take into account. South Africans are interested in security, internet connectivity, ease
of access to shops, proximity to schools, etc – if it’s millennials you’re looking at, best be close to
those all-important coffee shops with free Wi-Fi and gyms.
With the proper research and patience, adding a property to your investment portfolio can make
all the difference. There are very few investments where you can get someone else to contribute
to or pay off your asset!