Rental Properties

First things first: you need to manage your expectations. For most people, the truth is that they will not generate massive wealth through rental properties. Well, not by buying one or two homes or apartments and renting that out month to month. Why? Because you still have to pay for that property, as well as the maintenance of it and building insurance on it. And you have to charge a reasonable rental rate to keep your tenants. However, that does not mean you cannot create wealth from rental properties...

Consider this: properties tend to increase in value, meaning you can sell it on for much more than the amount you bought it for. However, you need to give it time to grow in value. Choosing to make the property available as a rental allows you to potentially cover the monthly down payments on the property. This means you do not necessarily make money (or create wealth) through the rental income, but it does mean that your properties pay for themselves. So, when the time comes when you either need the money or you do not want to deal with the management of the property anymore, you can choose to sell the property and the money you make off the sale would be pure profit.

The good news is that now is a very good time to invest in property, as the market is slow and many sellers have dropped their prices to secure a sale. At the same time, the interest rate has just been cut as well and the approval rate for home loans has dramatically improved. Data provided from the South African Reserve Bank indicates that advances on mortgages have grown progressively faster; in fact, in August 2019, it recorded 4,9% year on year – a growth rate last experienced in November 2010. Since the start of 2020, advances on mortgages in South Africa have outpaced the average growth of house prices – the first time this has happened since June 2011. All of these factors combine to make for a perfect environment for property buyers, especially with an eye on investment property.