News / Wed Oct 2021

Beginner’s Guide to Property Investment

WORDS Reef Hickley

Take your time and carefully consider all the potential outcomes of property ownership before rushing into your first impulse buy. 

As there are many factors to consider, first time investors will gain from researching the entire process - making you well-prepared to field any problems that may arise.  

Shop around for the best bond deals

Many buyers need to obtain funding before investing in a property. This usually comes in the form of a home loan granted by a bank. Notably, each bank has different lending criteria, some of which may result in more favourable interest rates for you. The home loan interest rate is the primary factor you should be looking at when comparing different packages.

This is made easier if you acquire the services of a home loan comparison service, who can apply to multiple banks on your behalf. It pays to shop around for the best deal. 

Keep in mind that you need sufficient funds - as sometimes lenders don’t offer a 100% bond, which means there’ll be a need for a down payment. The transfer process also requires the cost of attorneys, plus there may be insurance and repair expenses.

Wise up on property types performing well

The property market can be affected by political and economic factors, which means that investors need to stay abreast of trends. For example, properties in gated communities are expected to perform well due to ongoing security concerns in South Africa. And, sectional title properties also generally do well due to their popularity with students and first-time home buyers.

Trends also vary by area. Sometimes price deflation in upmarket areas can make those districts ripe for investment.  

Buy-to-let and generate income

While there’s always an element of risk, buy-to-let remains a popular go-to option for many investors. With some careful planning, buy-to-let can provide you with a reliable source of long-term revenue. 

If the property is bonded, at the outset you’ll be using the rental income to pay off the bond and expenses such as maintenance costs. Therefore, potential rental yield will be your primary concern when determining whether to invest in a property.

Try and figure out the prospective rental yield by looking at rental prices for other properties in the area. Generally, one-bedroom and studio apartments make for a good buy-to-let investment, as those property types have delivered consistently over the past decade.

Boost value by buying and renovating

One shrewd investment strategy is to purchase older properties and renovate to boost their value. If you are keen to apply your own creative talents to the job, this can be quite an enjoyable process.  

Kitchen renovations are considered most effective at boosting property value - as it’s thought that a kitchen often sells a property. But keep in mind that kitchen renovations don’t always come cheap, whereas a bathroom revamp is a relatively cheap way to enhance a property’s aesthetic appeal. 

Location can determine ultimate value

Location can make or break your property investment ambitions. The locale largely determines the value the property returns in the long term. If you buy a property in a crime ridden area, you can expect the value to go down fast. Or, if you purchase in an area with no social amenities, the value of your property will be limited. 

Choose a location with high rental demand and good prospects for selling if you are to consider selling at a later stage.

Spread out far and wide  

A good rule of thumb is to diversify. Don’t fixate on specific property types, or areas. Your portfolio will be less susceptible to market fluctuations if you invest in a broad range of properties spread across different areas. 

Look to the future and strategize

Property investment requires a long-term strategy and planning. Selling property is generally not advised, not even to fund the purchase of another acquisition. Legal costs, fees, taxes and more can take a sizable chunk out of your profits, so the smart option is almost always to keep a property and use it to generate income in the long term.