Preparing to buy a home


Property investment 101

Property investment 101

In this article:

Property is traditionally considered to be a sound investment option, even during challenging economic times. Research shows that the most active property investor buying in South Africa currently is in their late twenties and early thirties. Much of the investment market consists of "micro-landlords" who own fewer than 10 investment properties. It is worth remembering that property is a long game and there are practical steps to consider when investing.

1. Pay off existing debt

Your credit score and debt will affect your chances of securing a bond. Banks look at how you handle your financial commitments when deciding whether to lend you money for a home loan. Impulse buys and purchases on credit cards and store accounts could be detrimental to your credit score if that debt is not serviced regularly.

2. Save towards a deposit

If your budget allows, saving a deposit for a property purchase is one of the best moves you could make. It demonstrates to sellers and banks that you are a serious buyer, it brings down the amount to borrow, and it ultimately means you could get a better interest rate from the banks. Taken over a typical loan term of 20 years, even a small difference in interest rate could mean hundreds of thousands in savings, as the table below shows. On a R1 million bond, a 10% deposit at the current prime lending rate of 11.75% will save you R260 087 over 20 years, and will shave R1 084 off your monthly home loan payment.

Purchase priceDepositSize of LoanInterest
example %
Monthly saving
when paying
R100 000
Total bond
20 Year
R100 000
R1 000 000R0R1 000 00011.75%R10 837 R2 600 894 
R1 000 000R100 000R900 00011.75%R9 753R1 084R2 340 807R260 087

3. Check affordability

Find out how much you can buy for by getting pre-approved for a home loan. Once you know what you can afford, you can focus your search on properties that are within your budget and you will stand a better chance of getting the deal when you find a place you love.

4. Get the best bond

Shop around when applying for a bond, to make sure you get the best deal. BetterBond will negotiate with all the major banks, including your own, on your behalf and at no cost, to get you the best bond.

5. Budget for all costs

Remember to take all the costs of property ownership into account – not only your monthly bond repayments. Include rates and taxes, levies (if you're buying sectional title property), insurance, and utilities like water and electricity in your budget. Working from home has become much more common, so you should also budget for connectivity costs like fibre internet.

6. Be a good landlord

Once you've bought your investment property, know your role and rights as a landlord, and those of your tenants. Get good legal advice upfront and use a water-tight rental agreement that covers both parties. Check out prospective tenants by contacting their references and doing a credit check before signing. Being a landlord also involves maintenance and repairs, so have a list of reputable service providers like plumbers, electricians and carpenters on hand, and make sure you can cover maintenance and repairs to keep the property in good condition. It's all part of taking care of your investment and ensuring your asset grows over time.

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