select
|

The Benefits of Buy-to-Let

In South Africa, with its rapidly growing middle class, strong urbanisation trend and a staggering housing backlog, the opportunities for residential buy-to-let investors are phenomenal.

The Finance and Fiscal Commission (FFC) estimates that it will require R800 billion - and a “miracle” - to clear the housing backlog of 2.1 million houses. The imbalance between the growing demand for housing and the fast dwindling supply, which has all but grinded to a halt thanks to the banks’ stringent lending criteria and the enormous challenges faced by residential property investors, has ensured that rentals have increased steadily and rental stock shortages are evident across the country.    

Over the last 10 years, thousands of investors have taken advantage of this opportunity, which shows no signs of abating. Using a tried-and-tested system, which has been used by the world’s wealthiest for generations to create real wealth, they steadily and responsibly been building small but highly profitable portfolios of well-selected and well-managed buy-to-let properties. These portfolios are producing not only ongoing, passive, inflation-linked income year after year, but also ongoing capital growth, resulting in exceptional returns on investment. 

The Benefits of Buy-to-Let 

According to Paul Stevens, CEO of Just Proprty, the benefits of a buy-to-let scheme far outweigh any potential pitfalls. “There is a growing interest in the local property industry in buy-to-let property investments, which makes sense as the advantages of buy-to-let far outweigh any issues that may arise. Low interest rates, rising rents and recovering house prices have made the last few years very profitable indeed for many landlords.” 

Buy-to-let properties are usually bought with loans from the bank. This means that both the investor’s rent and capital gain are based on the total value of the property and not on the amount paid out to date. The gain on the investment is made on money that is, in reality, not yet his. By way of contrast stock exchange shares and money market products usually require full payment upfront – and are more subject to fluctuations.

“Buy-to-let properties almost always give satisfactory capital growth in the long term because housing, being a primary human need, is always in demand and there are usually stock shortages. This is an asset class, which, although affected by economic swings, tends to be more resilient than others. Over any 10-year period in South Africa’s history, a minimum growth of at least 45% has been achieved,” concludes Stevens. 

Over a long term period, buy-to-let is by far one of the safest asset classes and is capable of giving the investor excellent returns.

Just Property’s Tips for Buy-to-Let Success 


Buy the type of property that is most “lettable”.

Two-bedroom houses and flats are ever popular and appeal to the widest range of potential tenants, especially those who are finding it tough to get on to the property ladder. Avoid large family homes, which appeal to fewer potential tenants.

Don’t restrict yourself to your own immediate area

Don’t restrict yourself to your own immediate area but research others nearby, where the rental yields may be markedly better.

Make sure the area has a healthy market for tenants.


Convenience is a useful factor. Being within walking distance of shops, railway stations, the town centre and so on will ensure that your property is high on the list of desirable places to live for tenants.

Using a mortgage makes your money work harder.

Whether to go interest-only or repayment is a personal decision, but a rental income high enough to cover a repayment mortgage is a good indicator that you are getting things right. Take out a fixed rate if you are uncomfortable about the chances of interest rates rising, although you will pay a premium.



  Comment on this Article

  Please login to post comments

Post to my facebook wall
  
2000
Characters remaining


    Latest Property News
    • 23 Jan 2018
      Many people only start thinking about home-ownership when they are ready to “settle down” or start a family, which is why first-time buyers these days are generally in their mid-30s, compared to those in the previous generation who were usually in their mid-20s.
    • 22 Jan 2018
      Moving away from the city to a country or coastal town and a slower-paced life is a frequent new-year resolution for South Africans, but thorough research should be done before you break free from the hustle and bustle, because making the wrong move could turn out to be a very expensive mistake, and even more stressful for you and your family than staying in the “big smoke”.
    • 22 Jan 2018
      Cape Town is home to many breathtaking and historic homes, but House Invermark designed in 1969 by South African architect Gilbert Colyn, with inspiration from two modernist icons: the Glass House by Phillip Johnson and Farnsworth House by Ludwig Mies van der Rohe is in a class of its own.
    • 22 Jan 2018
      2017 was a challenging year for the South African property market in general, despite small pockets of thriving activity in areas like the Western Cape. As we head into 2018, Tony Clarke, Managing Director of the Rawson Property Group, casts his eye forward to property trends and market influences that could make their impact felt in the New Year.
    • 19 Jan 2018
      Extending from Randfontein in the west to Roodepoort in the east and including the towns of Krugersdorp and Magaliesburg, the West Rand has a plethora of property available to residents who choose to make this unique area their home.
    • 19 Jan 2018
      When it comes to financial planning, doing the work to ensure you’re prepared for unexpected emergencies is just as important as ticking off your other goals and New Year’s resolutions. The beginning of the year is also the perfect time to review your various insurance policies.
    • 19 Jan 2018
      No surprises at the first Monetary Policy Committee of 2018, as Reserve Bank Governor, Lesetja Kganyago, announced that the interest rates would stay at their current levels.
    • 18 Jan 2018
      The Southern Suburbs make up some of the most popular residential areas in Cape Town, comprising charming groups of suburbs which lie to the south-east of the slopes of Table Mountain. It is seen as the city's most expensive residential neighbourhoods with a choice of various private schools, upmarket eateries, wine estates, beautiful homes and trendy apartments.
        
    X
    Subscribe to the MyProperty Newsletter

    Name  
    Last Name  
    Email Address  
    Email Frequency
    select
    X
    Share this Page

       
    For Sale Property
    Rental Property
    More Options
    About
    Connect with us
    FEEDBACK