Tips for first-time property investors in South Africa

With things like EWC and the CPA Act, RHT and more, property investments in SA is an extremely bad option. Learn your lessons yourself. No better way to learn.
 
  • Like
Reactions: Pax
Thanks Arnold.

Thanks for not mentioning anything about recessions or interest rate cycles.

But hey, "Location is the most crucial factor."
 
bromster said:
Thanks Arnold.

Thanks for not mentioning anything about recessions or interest rate cycles.

But hey, "Location is the most crucial factor."
Click to expand...

There are still many stupid people out there, jumping in closed-eyes and buying properties as "investments" or because they do not want to pay other people's bonds. He makes money from these stupids, so he is not affected by these things. The stupids, on the other hand soon end up on legal Facebook groups begging for help on what they can do as interest rate hikes are killing them and they can no longer afford repayments. Or, they have a tenant who no longer pays and refuse to leave and why they now have to spend R100k+ on legal costs to get them evicted....
 
2 years ago when I took the bond instalment was 12,500 odd and as of this month I am sitting with 16,100 with the interest rate increase
 
rvZA said:
There are still many stupid people out there, jumping in closed-eyes and buying properties as "investments" or because they do not want to pay other people's bonds. He makes money from these stupids, so he is not affected by these things. The stupids, on the other hand soon end up on legal Facebook groups begging for help on what they can do as interest rate hikes are killing them and they can no longer afford repayments. Or, they have a tenant who no longer pays and refuse to leave and why they now have to spend R100k+ on legal costs to get them evicted....
Click to expand...
It can take you a year or more to evict a tennant. And usually you have to provide for alternative accomodation if you evict them.

Costs can set you back R50 000 in lawyers fees alone.

And Tennants generally dont care about places they stay in. We had a lawyer who had a food fight with his girlfriend the day before he moved out. Has to scrub and repaint everything. He couldnt care less about his deposit either.

We had another family driving the latest fanciest cars, who had ripped off genuine silk curtains for their dog to have puppies on. Yip. They stripped the house of all the electronics and fled. We soon discover they were using fake paperwork.

As such I would never buy to rent out. I would rather buy land and leave it empty and sell it on to a developer one day.
 
Corelli said:
It can take you a year or more to evict a tennant. And usually you have to provide for alternative accomodation if you evict them.

Costs can set you back R50 000 in lawyers fees alone.

And Tennants generally dont care about places they stay in. We had a lawyer who had a food fight with his girlfriend the day before he moved out. Has to scrub and repaint everything. He couldnt care less about his deposit either.

We had another family driving the latest fanciest cars, who had ripped off genuine silk curtains for their dog to have puppies on. Yip. They stripped the house of all the electronics and fled. We soon discover they were using fake paperwork.

As such I would never buy to rent out. I would rather buy land and leave it empty and sell it on to a developer one day.
Click to expand...

If the tenants contest, your legal fees quickly run up to R200k+ and often a few years where you keep them in your premises, you pay the bond and their water and electricity as you may not cut them off.
 
rvZA said:
If the tenants contest, your legal fees quickly run up to R200k+ and often a few years where you keep them in your premises, you pay the bond and their water and electricity as you may not cut them off.
Click to expand...
Exactly. Although it seems risky

I would rather have my house paid off, and invest in say a guaranteed fixed deposit, and watch the interest rates rise, because at current rate I get about 11 percent interest on an investment with no risk return and the capital is guaranteed.

At a Million rand its R9191 interest per month, with zero risk other than paying some tax on it, less the tax threshold which I think is R29000 for the year.

Add another million and I will be able to cover all my monthly costs even if I quit my job.
 
Best way to earn money through property?

Buy industrial property. Far less hassles.

You see residential has far higher risks ie you cant easily boot someone from a place of living.
 
Corelli said:
Exactly. Although it seems risky

I would rather have my house paid off, and invest in say a guaranteed fixed deposit, and watch the interest rates rise, because at current rate I get about 11 percent interest on an investment with no risk return and the capital is guaranteed.

At a Million rand its R9191 interest per month, with zero risk other than paying some tax on it, less the tax threshold which I think is R29000 for the year.

Add another million and I will be able to cover all my monthly costs even if I quit my job.
Click to expand...

Thing is, the reality of the matter is that in South Africa property is no longer an investment. In fact, you have to be crazy to invest in property. I do agree with a person who wants to buy a house for himself to live in and have no intention to rent out or generate an income from the property. This makes sense if you have no plans to ever emigrate. But, then there are always the EWC risk. You could lose your ownership of the land under your property at any given day. So, property isn't an investment any way you look at it, but sometimes you need something to live in. Whether you buy it via a bond or rent it, is basically all the same.
 
If I put a million in money market fund @8.2%, I get 6 833 per month. If I put the same 1Mil in long term fixed deposit @11.65 I get 9 708.

If I buy property for that price cash and compare the returns and outflows and manage the nonsense its worth useless investment. One of my friend spent 200k to evict someone that includes written off rent

A *#%* market where &$@? Tenants have more power
 
Investment properties should be used as a way to diversify your portfolio.
30% of my net worth is in Property but I will never let it be more than that.
Investment properties comes with hassles yes and the roi might not make sense for some. If you do your due diligence before leasing the place to someone then you should be ok.Heck theres even such a thing as landlord insurance that covers eviction costs.
People trying to lease out a home themselves without knowing 2 poops about what they are doing will get burnt.
I mainly invest in apartments and also have 1 commercial building of approx 400sqm in floor size.

As with any investments there are lots of ups and down cycles and sometimes as most articles dont mention additional monthly expenses so don't expect to always break even when it comes to rent=bond....
You might need to cough up some money every month out of your own pocket.

Also I like debt when it comes to buying property due to the tax benefits ie the interest paid on the bond can be deducted from the rental income as with any other expense ie. Levy, municipal account, rental agent commission etc.
Earning interest on a fixed deposit will only add to your tax burden.

I bought a apartment that was a fixer upper in a amazing complex. Bought it way under market value with a absolute stunning view over table mountain.

Spent 75k renovating the place and after all deductions I only pay R967 pm out of my own pocket on the bond (pre - March interest increases so it will be more end of April) so basically that is what a R1.4m property is costing me pm.


I need more wine
 
JSRJJ said:
If I put a million in money market fund @8.2%, I get 6 833 per month. If I put the same 1Mil in long term fixed deposit @11.65 I get 9 708.

If I buy property for that price cash and compare the returns and outflows and manage the nonsense its worth useless investment. One of my friend spent 200k to evict someone that includes written off rent

A *#%* market where &$@? Tenants have more power
Click to expand...
Please tell me what tax benefits do you have on those investments.
 
JSRJJ said:
If I put a million in money market fund @8.2%, I get 6 833 per month. If I put the same 1Mil in long term fixed deposit @11.65 I get 9 708.

If I buy property for that price cash and compare the returns and outflows and manage the nonsense its worth useless investment. One of my friend spent 200k to evict someone that includes written off rent

A *#%* market where &$@? Tenants have more power
Click to expand...


You don't buy investment properties cash
That's just dumb.
 
rvZA said:
With things like EWC and the CPA Act, RHT and more, property investments in SA is an extremely bad option. Learn your lessons yourself. No better way to learn.
Click to expand...
I have to disagree but each to their own.
 
Most people have to enter the property market at some stage of their life.
I would rather buy than rent in SA.
 
Last edited:
You must log in or register to reply here.
Back
Top
Sign up to the MyBroadband newsletter
X