Five major questions answered about investing in property

Investing in property pays off for hundreds of thousands of South Africans who have taken the leap to buy a home. But there are many more who don't invest in property out of fear, misconceptions or plain old ignorance of the stellar opportunities this form of investment holds.

Mark de Lange, a property expert and the founder of NS Property Solutions estate agency, answers some of the most important questions about investing in a home. His insights prove that investing in property is within reach of anyone with a stable income and a disciplined approach to their money.

Read on to learn what your property investment journey could look like, from your first small rental home to that dream house you've always had in mind. It really is that simple, if you follow Mark's advice to get started as soon as you can.

Your property investment questions answered...

Many people think of property as something you should buy to live in. Is that the best way to invest in property?

Mark de Lange: No, it isn't actually. Take Cape Town as an example. People from across the country own properties in the Mother City but stay in other provinces. For some, the idea is to buy now and come live here one day. Others buy close to the universities to which they believe their children may one day need accommodation. For many, it's how they get a foothold in the ever-growing Cape Town property market, even if they don't live here.

You don't have to live in the property you buy. But that doesn't mean you should live in a rental property for the rest of your life either. Your once-in-a-lifetime dream home actually becomes more attainable once you've bought your first property. You have to start somewhere, so why not with a property that you can rent out and start making an additional income.

South Africans everywhere struggle with debt. Does it make sense to invest in property if you still have debt?

Mark de Lange: It depends completely on your type of debt. If you have unsecured debt, such as a personal loan, store card credit or other high-interest loans, you're less likely to get a home loan. But debt such as vehicle finance or a home loan is secure debt, because you have an asset in the form of a car or a home.

If you have unsecure debt, you first want to pay that off - and see if you can save up for a deposit. Having enough money to put down a deposit on your first property is ideal because it will reduce your monthly home loan repayments.

It can be tough to think about investing in a home worth millions. Can I invest in a property of less than R1 million, even if I don't want to live in it myself?

Mark de Lange: Yes, a small property can still be a good investment, but only if it's in the right area. The amount you make from renting out a smaller home might be little when you start out, but it will grow. If your property is in the right neighbourhood, you'll be able to escalate the rent with at least seven percent every year. Within a few years, your property might start paying itself off, while growing in value as an asset too.

That's the beauty of investing in property. When you invest in policies and annuities, you might be putting away R500 a month, and that's all there is to it. Property is the only thing where you can invest in something much larger without having all the money necessary to buy it. If you're credit worthy, you can get a home loan and start making money from renting out the property before paying off the loan.

Agent rental fees sound like they can be expensive. Would I make a profit leasing a property if I have to pay agent rental fees?

Mark de Lange: Absolutely, yes. Remember that your estate agent's fee is calculated as a percentage of the monthly rent. So, the smaller the property and the monthly rent, the smaller the agent fee. And you can deduct the fee from the tax you pay on the rental income you make.

It doesn't make sense to own an investment property and not use an estate agent. Using a realtor is how you protect your investment. Keep in mind that the wrong tenant in your rental home can be a high risk. They can damage your property, rack up water and electricity bills or stop paying altogether, without any way for you to legally get them out of your property.

Luckily estate agents have access to tools to protect you from this. They use various techniques to make sure the tenants they place are good at paying their bills. These are things you can't check by yourself as the homeowner. Homeowners also don't know the law as well as rental agents do so it truly pays to stick to an estate agent.

If I buy an investment property to lease, can I buy a dream home for myself later? How do I know I'm in the right financial position to buy another property?

Mark de Lange: In most cases, you will be able to buy your dream home too. A bond originator will be able to tell you exactly what you can afford, free of charge. Either way, owning a rental property puts you in a much better position to apply for a large home loan. That's because banks or home loan providers will be able to see that you already own an asset, which you manage responsibly and which brings in additional income.

Without that first property, you might not be able to apply for a loan large enough to cover the cost of the dream home you have in mind. That's why it makes sense to start small and as soon as possible when it comes to property investment. In just a few years, you might start seeing an income and growth of your asset, which gives you access to a whole new level of investments.

Interest rates are high at the moment. Are there any benefits to buying now?

Mark de Lange: Yes, and that's because when interest rates are high and home loans are costly, there are many homeowners that are desperate to sell. Even though it's a sad situation for the seller, it puts you as the buyer in a good position to purchase the property at a fair price. You might even get the property at a lower price if someone has to sell urgently.

It can be a mistake to wait until interest rates are low because then there are fewer properties on the market and you're more likely to buy a home that you won't be able to afford once rates increase again. If you consider that property is an asset, and even a great emergency savings plan, then there really is no reason to wait.

If you're ready to start investing, contact NS Property Solutions for advice and guidance.

You can also explore our properties for sale here.

Want to learn more? Discover the basics of property investment here or learn how to invest the clever way in our article How to invest smartly: Things to keep in mind when buying a home