Investing

5 All-time Best Tips for First-Time Property Investors

Story Highlights
  • #1 – Consider buy-to-let properties
  • #2 – Think about investing in fixer-uppers
  • #3 – Choosing a good location = savvy investing
  • #4 – Get your finances in order
  • #5 – Research more than one bond option

Investing in property remains one of the best ways to build equity and ensure that your investment capital appreciates over time.

Despite the economic difficulties South Africans faced over the past two years during the pandemic, buyers are still flocking to the housing market to start or expand their real estate portfolios.

With the interest rate at 7.75%, it is still a great time for potential buyers to start house-hunting and scoop up their next property or two. 

If you are considering investing in property for the first time, there are a few things that you need to keep in mind.

Even though it is a wonderful financial opportunity, there are some pitfalls that you should try to avoid, especially if you are going to buy the property to rent it out.

Here are a few things to consider before taking the plunge into property investing. 

#1 – Consider buy-to-let properties

One of the best ways to get a foot in the property door is to purchase a property that you are going to convert into a rental unit.

The rent that you generate from the rental unit will then pay off the bond every month and it doesn’t cost you a cent…

Sounds perfect, right? It is certainly not as easy as it sounds.

As with every investment, there are risks that you need to be aware of. If you don’t find a tenant soon enough, you will be responsible for the mortgage payments every month.

You might also have an irresponsible tenant that vandalizes and damages the property. This can cost you even more in repairs!

Always make sure that you screen your tenants before you let them sign the rental agreement and do frequent checks as soon as they move in. 

Related Reading: 5 Steps to Investing in Real Estate in 2022

#2 – Think about investing in fixer-uppers

Another great way to boost your portfolio is to buy a fixer-upper.

These properties are often in need of a loving touch and then they are transformed into gorgeous homes.

Fixer-uppers are often priced below market value because they are not in the best state. However, it might not be as affordable as it sounds.

When buying a fixer-upper, consider the renovations and repairs that you will have to make. Take into account the purchase price of the house and the amount you have to spend on fixing it.

You can then choose to sell it again or you can rent it out.

Whichever choice you make, always ask yourself whether the option is profitable or not. You don’t want to lose more money than you have already spent. 

Related Reading: 4 Questions to Ask Yourself when Buying a Distressed Property

#3 – Choosing a good location = savvy investing

You have probably seen it in every property article that you have read and it cannot be stressed enough: location will impact your investment.

If you are buying property as a home for yourself, then the location will determine your living experience and your lifestyle.

Properties in crime-infested areas won’t do much for your investment. The resale value will also not be very high if the crime rate continues to soar.

You will feel much safer in a neighbourhood where there is a community watch and where you know your neighbours will have your back. Your investment will also appreciate over time as people prefer to live in safe neighbourhoods.

If you are buying to rent, then look at areas where the rental demand is high. These might be in areas near schools, shopping malls, bus stops, and other important amenities.

You can also have a look at the rental amount per month of rental units similar to your property. This will give you a good indication of how much you can ask per month without being unreasonable. 

#4 – Get your finances in order

Investing in property requires you to go through a lengthy process and to make this easier, you need to check your finances.

First, you need to ensure that you have a healthy credit score. You can improve this by paying off debt as soon as you can and closing any unused accounts that are still active.

Secondly, you can get pre-approved at a financial institution. They consider your finances and credit score before offering you a loan amount. This will give you a better idea of the price range you can look at when property hunting.

And finally, you need to save up for a deposit. Many financial institutions want a deposit before they approve your bond.

Even if it is not a requirement, it helps reduce your monthly bond costs significantly. 

#5 – Research more than one bond option

Different financial institutions will offer you different bond options. It is important that you shop around before you make the decision.

Some banks might only offer you 90% of the loan amount whilst others can offer you 105%.

They also have different lending criteria that they apply to lenders. Ensure that you choose the best financial institution that can offer you the best interest rate. In the long-run, this can make a huge difference!

Related Reading: Things to Consider Before Accepting a 105% Home Loan

Final thoughts

Investing in property is an exciting journey and it can be one of the best financial decisions that you make in your lifetime.

Keep in mind that it is an investment so approach the process with logic and enough knowledge.

Research unfamiliar aspects or terminology or ask a more seasoned investor for help. This will only empower you to build up your portfolio and put you on the path to real estate success. 


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