Property investment allows you to make your own decisions and grow your own portfolio.
With a mortgage loan, you can purchase a property and let it to tenants to assist in repayments. This means that, even if you don’t have a lot of money to start with, the combination of rental income and property value increases the worth of your asset.
We asked two private investors to share their experiences.
THE BEGINNER
Sello Latakgomo (29) grew up in a township in Pretoria. After completing his studies, he was employed by one of SA’s major banks and, after doing some research, he realised that property investment was within his reach.
Six months ago, he found an affordable two-bedroomed flat in a secure complex in Boksburg. The asking price was R475 000, but – after negotations – the seller agreed to reduce the price to R455 000.
Latakagomo had managed to save just enough to cover the transfer fees and pay for some renovations to the property, so he told the bank he’d need a 100% bond. Luckily, it granted him this and he was able to buy his first investment property.
“I have a 20-year loan and my current monthly repayments are R3 700. You can get a longer repayment term, but the more years you take to repay the loan, the more interest you pay. So it’s best to stick to 20 years or less,” he says.
The rental income from Latakagamo’s current tenants is R4 700. This almost covers the bond repayment and the levy of R1 400. Latakgomo also pays R1 000 of his own money towards the bond each month to settle the debt as soon as possible.
He says he didn’t struggle to find reliable tenants. He simply signed a new 12-month lease with the people who were already occupying the property.
“I was lucky. If you go the route of employing a rental agent, you have to pay them 10% of the amount the tenants would be paying and this is expensive. So I’d rather manage this on my own,” he says.
However, while he hasn’t had any problems with his tenants, he’s aware that things sometimes go wrong and rent payments can become an issue. He takes a pragmatic approach. “It’s about building a relationship. If you know what’s going on in their lives, it’s easier to understand and be lenient. However, to do that, you need to have some back-up savings in case things go wrong.”
