Property Investments For Beginners In South Africa

If you’re thinking of investing in property South Africa, now could be the best time for beginners to get onto the property ladder.

Furthermore, interest rates are the lowest they’ve been since 1973 & the property market is showing signs of revival post Covid-19, making property investments for beginners in South Africa a safe bet.

Not only is the timing right for making a property investment in South Africa, but it also makes buying a wiser choice than renting.

These tips for making wise property investments for beginners in South Africa should help you avoid any costly mistakes.

5 Must Read Tips For Smart Property Investments For Beginners In South Africa

1. Buy-To-Let Property Investments

A buy-to-let property investment has not always been a great option during times of high interest rates & high property prices.

However, things have changed recently with property prices having been driven down by the economic recession in SA.

Added to this, the Covid-19 virus has caused further downward pressure on property prices making it a buyers’ market & an excellent time for investing in property in South Africa for beginners.

This buy-to-let option allows you to generate monthly rental income from your property.

Before buying the property, you should consider all of the following.

• Rental amount – do some research to establish what rentals similar properties in the area are getting.
• Rates & taxes and levy amount if applicable – these costs will have to be paid from the rental amount.
• Bond repayments will also have to be paid from the rent amount
• House insurance – this is the insurance for the actual dwelling which you’ll also have to pay, but it’s often included in your bond repayments.
• Unforeseen costs – maintenance, repairs & damages.
• Calculate the potential rental yield – if the property is valued at R950,000 and the rent potential is R120,000 (R10,000 per month), then the yield percentage will be R120,000/R950,000 = 12.6% (the higher the better).

Read this comprehensive guide on Buy To Let In South Africa

Therefore, you’ll need to subtract the property costs (above) from the rental income to determine whether you’ll see a profit.

Whilst there will always be risks involved in letting a property, they can be lessened by buying & planning carefully to ensure a reliable source of income in the long-term.

2. Minimize Property Investment Costs

i) Home Loan Interest Rate

The first thing to do when investing in a property, is to ensure you’re getting the best deal possible on your bond.

That’s right, not all bonds, or home loans, are equal for these reasons.

• You will find that various banks have different lending criteria, which means that one bank may give you a bond at lower interest rate than another.
• Furthermore, your own credit score may influence the interest rate you qualify for with a particular bank.

It therefore pays to spend some time investigating various home loan institutions and find out which one will be the best fit for you.

Beginners could make use of a bond originator, who will apply to various institutions on your behalf to secure the most favourable terms & interest rate for your property investment.

ii) Transfer Duty

If you’re investing in a property with a value less than R1 million, you’ll be exempt from paying any transfer duties.

Furthermore, you will be able to find really decent properties priced at under R1 million.

For instance, this 2 bedroom apartment in a secure estate near Fourways, priced at R939,000, would make a great investment with zero transfer duty payable.

3. The 3 Most Important P’s When It Comes To Investing In Property

These are, Position, Position & Position.

That’s right, rather pay more for a house, or apartment, in the right area than save on a similar spec property but in a poorer area.

Your property’s position is one of the most important factors when it comes to property growth, selling or attracting quality tenants.

4. Buying To Live In

Whilst buying-to-let is popular, buying a home to live in is a fantastic way of investing in property.

Not only will your property grown in value, but you get the added benefit of being able to live in it.

It’s also really pleasing knowing that you’re paying off your own bond, with a view of owning the property yourself, as opposed to paying money to a landlord every month.

Living in your own home also allows you to make property improvements that you will not only get the benefit of enjoying, but that will also improve it’s value.

In the 2000’s, it wasn’t uncommon to almost double a property’s value upon selling it after 5 years, in certain areas.

5. Choosing the Type Of Property

In recent times property investments for beginners in South Africa have mostly been in secure estates or gated communities.

These types of properties are usually apartments or cluster houses.

Apartments are usually governed by the sectional title act or form part of a share block in the case of older apartment blocks.

Cluster homes usually form part of a home ownership scheme, a Section 24 Company, the board of which would consist of home owners in the complex.

Both are very popular types of property investments in South Africa due to security concerns & a safe bet for beginners.

Conclusion On Investing In Property In SA

The most important thing to remember is that realising a profit from your property investment may take time.

To make money like the property tycoons, you need to be in it for the long term.

Whilst making quick profits by property flipping, seeing gains on your property investment is a long term game and certainly not a get rich quick scheme.

Lastly, beginners dreaming of making the big bucks from investing in property, should read the 10 steps to buying a house in South Africa process before rushing out & signing an offer to purchase.