But: why would you want to, where do you start and how can you make money through property? These are all great questions and we will address them today.
Why invest in property?
- Investing in property is the ultimate way to build wealth. Building wealth will lead to financial independence and this can lead to you being your own boss, not reliant on a salary for your lifestyle.
How can you make money through property?
There are 2 ways:
- (1) Profit from rental income. Find tenants to rent the property from you. This puts money directly into your pocket. You just need to make sure the rental income is more than what the property is costing you on a monthly basis. Whatever the difference is profit straight in your pocket every month. This is called being cash flow positive.
- (2) Profit from capital growth. When you buy a property, you borrow a fixed amount from the Bank to pay for the property. Property, however, increases in value over time. Say, for instance, you buy a property now for R250,000. In 3 years time the value may have increased and say it is worth R275,000 after 3 years. The difference is your profit! Thus R275k - R250k = a profit of R 25,000.
Where do you start?
- (1) Get Finance from a Bank. This should not be too hard. Banks generally encourage property investment. Just make sure you can afford your primary property (where you live) as well as your investment property. Great news is that all expenses like levies, rental agent fees, interest on the bond etc are all tax deductable!
- (2) Find an investment property.You will need to do your homework. Luckily, South Africa has a growing middle class who are populating the urban areas. The trend is that they are favouring renting over buying, which creates a high demand for rental properties. Find a location where there is a high rental demand. In general, the buy-price-versus-rental-income is best in properties under R600k.
- (3) Have a good strategy.For example, if you can buy a property in a good location and purchase it for less than its market value, you are able to pay the property off sooner if you use the monthly profit from your rental income. Once the property is paid off, you receive an inflation-linked income for life from this property!
Words of advice for beginners?
- Be patient. Investing in property is a process.
- At first, focus on residential property. Residential property is less volatile than commercial property.
- Learn as much as you can. Join online property forums. Sign up for email newsletters and updates. Know when there is a bargain in a property area.
- Start small by investing in a small residential property. This will help you understand the legal and business processes surrounding property transactions. In turn, this will minimise your risks.
- Monthly newsletter. Subscribe to receive property news and trends.
- Facebook. Like us to learn more about property.
- Twitter. Follow us to be the first to know.
- Less than market value properties. Subscribe to our free bargain property notification service.The Nethold Group has reclaimed residential property for sale below market value. This will let you know as soon as a new bargain property is listed.
- Nethold Group owns all the property it rents or sells and is not an Estate Agency.
- Visit the Nethold Group website for more.