Investing in property is an essential tool in building long-term wealth, and achieving financial independence. For beginner investors, knowing where and how to start can be tough. This Beginner’s Guide to Property Investment in South Africa goes into the basics. It covers everything from financing to selecting the right property, to expanding an investment portfolio. Having the correct strategy in place and IGrow’s expert team on hand makes property investment accessible to ordinary South Africans who want to get started. IGrow Wealth Investments has helped thousands of South Africans on their property investment journey.
Why should you invest in property?
Property investing has numerous benefits:
- Wealth generation: A well-chosen investment property in the right area will appreciate over time. This means the value of the property itself increases by 6% or more every year, beating inflation.
- Secure rental income: Tenants offer you a reliable income stream which will increase annually in proportion to any bond payments you have.
- Tax benefits: Specific property-related expenses are deductible, including the interest portion of your bond repayment and rental management fees.
- Diversification: Property can add a tangible asset to an existing portfolio of stocks, unit trusts or other assets.
For beginner investors, properties with strong rental demand, security, and long-term growth are good options.
How to begin building your property portfolio
The best place to start in property investment in South Africa is knowing what your financial goals are. Your age, income level, retirement goals and risk appetite affect your choice of property and the strategy you will follow. Then you need to work out which properties will work best for your portfolio. IGrow can help you identify properties that offer strong fundamentals in terms of location, building quality and tenant demand as we research all properties we offer to our investors. IGrow Wealth Investments has expert property investment strategists who will assess your financial position and aid your overall strategy, and they work with you long term, free of charge.
The next step is curating a financing plan. An IGrow bond originator will contact multiple banks for you, helping you with your affordability profile and securing competitive interest rates. Many beginners do not realise that your own bank will not necessarily offer you the best deal, and that a bond originator charges you nothing to submit your application to multiple banks and negotiate the most competitive loan term and interest rate.
Once you have purchased a property or two, it will appreciate (grow in value), and equity will build. You can then use that equity to buy further properties. Banks will also consider your rental income and equity from existing properties as part of your affordability for future investments.
Reinvesting, diversifying your portfolio across multiple suburbs and keeping abreast of trends help expand your investment portfolio. Your dedicated strategist can help you with detailed long-term planning and getting the timing right to build a strong portfolio.
Where should beginners invest?
South Africa has good options across key provinces. The Western Cape and Gauteng (Johannesburg and Pretoria) have urban areas with strong rental demand and capital appreciation thanks to excellent job opportunities, health care and education.
Cape Town and surrounds offer tenant appeal for those seeking employment, top universities, exciting amenities and lifestyle perks. Johannesburg and Pretoria offer established rental markets as economic powerhouses, with excellent schools and hospitals and vibrant city lifestyles.
When choosing your property, it’s not merely about location, but you need to consider if the property has secure, regular rental demand, and offers strong returns on your investment and long-term capital growth opportunities. You can read about different options like sectional title schemes (estates) to find out why we generally favour these for buy-to-let investment.
Why choose to partner with IGrow?
IGrow Wealth Investments has a full in-house team aiding you on your property investment journey. We help investors with financial planning, property choice, securing financing and property management through IGrow Rentals. We have been in action for two decades and our expert team team is ready to help you get started.
Frequently Asked Questions
How much money do I need per month to start investing at IGrow?
Investors can start with a personal or combined household income of around R25,000–R30,000 per month or more. We have some more affordable properties for sale and also some exclusive luxury developments. Your affordability profile relies on your income, expenses, credit profile and choice of property. Most of the properties we sell come with the IGrow signature discount to help you get started, and there are usually no upfront costs in the form of deposits, transfer and bond fees. Some properties require a R10,000 deposit, but this is rare.
Can you combine income to get financing?
Yes. Married couples or partners can use their combined household income when seeking finance. Joint home loans can improve affordability.
Is securing financing hard?
IGrow’s bond originators assess your finances and approach multiple lenders on your behalf. This improves your chances of home loan approval. Banks are often willing to offer 100% loans for the right kind of rental property.
Is it necessary to get pre-qualified for a loan?
Pre-qualification isn’t always compulsory, but it helps you understand your affordability before you look at properties and shows that you are a serious buyer.
How can you get a 100% home loan?
A 100% home loan covers the property’s purchase price without needing a deposit. Home loan approval factors in your credit profile, income level and affordability, as well as the type of property you are investing in.
What will improve my chances of getting home loan approval?
Having a healthy credit score, minimising debt, stable employment and partnering with a bond originator who can do all the legwork on your behalf and has a strong track record and negotiating power.
Will my rental income cover my home loan repayment?
This is dependent on the property, how large a loan you take out, and the rental income attached to it. In some cases, there could be an initial small monthly shortfall. This is usually a good sign that a property is good quality and in a popular area. Rental fees increasing and property appreciation improve the investment overall and you will break even in 3-7 years. A shortfall is a bit like paying into a retirement fund – you are investing in a long-term wealth-generating asset.
More questions beginners have
Which type of property is best for beginners?
There is no one-size-fits-all solution. Units in high-demand suburbs and secure developments are often good options as they’re more affordable, have high tenant demand and less maintenance needs. Your choice of property should always align with your investment goals.
What are the risks of property investment for beginners in South Africa?
Risks can include vacancies, interest rate hikes and tenants not paying their rent. IGrow’s professional Rental Managers help with this process through tenant screening, rent collection and active maintenance. Their vacancy rate is 0.4%, which is far lower than national averages.
How does property investing weigh up in relation to other types of investments?
Property investing provides a tangible asset that offers rental income and long-term capital appreciation. Unlike more volatile investments, investors will reap rewards from the physical asset and its rental income potential. In terms of long-term wealth property generally outperforms other investment classes and in much less volatile.
How can I start my investment journey with IGrow?
Book a consultation with an IGrow Wealth Investments property investment strategist. The team will assess your affordability, help you choose suitable properties, aid with financing and manage your rental property.
Conclusion
This Beginner’s Guide to Property Investment in South Africa shows that being a property investor doesn’t require huge wealth or vast experience at the start. With our team’s strategic planning and professional guidance, beginner investors can build an investment portfolio designed to create wealth.
Contact an IGrow property investment strategist today and let’s get your property investment journey started.
