Is Buying Property to Rent a Good Idea

When I read this in the Sandton Chronicle, I thought it was high time we speak about buying property to rent.
“Ward councillor of Ward 106, Stephen Moore said houses in Bryanston and Petervale, priced about the R1 million mark, were abandoned after the drop in the property market made them hard to sell.
He said, “The property market at the moment is down and people aren’t getting the prices they want. They also don’t get their rates clearance forms, so after a while these properties are just forgotten and abandoned.” Many of these houses have become places for vagrants to live.
This newsletter is for the small investor who is thinking of buying residential property to let.
Before you buy a Property to Rent, be aware of the following;

  1. There is an abundance of properties FOR SALE because there are fewer buyers due to retrenchments, salary cuts, etc…
  2. Those who had bought properties for the Air B&B market are now offloading their properties because travel restrictions mean they have not made money in a while. This is further worsening the oversupply problem for those wanting to sell properties right now.
  3. Some of the air B & B owners are also letting out their properties. This also contributes to a large number of vacant properties to let  
  4. The Covid-19 pandemic and work from home culture means that people are now happier to live a bit far from their places of work as they don’t have to drive to work daily. So properties near big cities are no longer as in demand as they were before, especially because they tend to be more expensive
  5. In the past, smaller was the way to go for rental properties but work from home means that people need to have home offices so smaller properties are no longer as attractive as they once were.

Ask yourself the following questions before you buy property to rent it out

  1. Can you afford to not have a tenant for a couple of months? This is now the reality for many property owners
  2. What if your tenant gets retrenched?
  3. What rent are you most likely to get? Don’t be emotional about this. Check what rent is paid by tenants in the same complex or block of flats
  4. Can the rent cover the following costs;
    • Monthly bond repayment
    • Levies – which are payable by the owner
    • Taxes payable to the municipality by the owner
    • Home owners comprehensive insurance payable by the owner
    • Agent’s commission
    • Incidental costs e.g. repairs and maintenance, insurance excess in case of geyser burst as an example
  5. Buying property comes with huge upfront legal costs i.e. bond registration costs and transfer costs. Given this, will the investment be profitable? When will you start getting more in rent than what you are paying out monthly?
  6. Remember that if you buy property and you can no longer afford to keep it, it might take a while before you find a buyer – especially in the current environment. Sometimes you might be forced to sell the property at a loss


  1. Contact ThuthukaSA Home Loans so we can help you get the most reasonable home loan rate with one of the banks. The lower the rate of interest, the better it is for you.  Trying to get a home loan on your own can be a daunting task. Banks also tend to charge you a bit more in interest rate for rented property so you want to give yourself the benefit of working with us to help you negotiate a better rate
  2. You are likely to be required to pay a deposit for the property so start saving up asap. We can help you open a tax free investment account with high returns to build up the deposit for your rental property
  3. Remember that you must pay tax on the rent you receive from your tenants

Do your homework before you buy property to rent

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