If you win millions in tonight's Powerball Plus, don't just buy yourself a new home - buy a few rental properties and become an investor
Tonight’s Powerball Plus jackpot is a guaranteed R80 million, and if you walk away with the full stash, or even a large chunk of it, it may be wise to use it to start a property portfolio.
Sure, you may be tempted to buy yourself a luxury home – or even a bigger and better home than the one you already live in, but don’t count out a new venture into the world of property investment.
For a few million rand you could buy one, two, or even more apartments or houses to rent out, thereby starting a legacy of wealth generation.
For example, you could use R3 million of your winnings to buy this two-bedroom, two-bathroom apartment in the Cape Town City Bowl – a popular area for tenants, as well as this R3.5m three-bedroom, two-bathroom property in the sought-after Umhlanga Ridge area in KwaZulu-Natal.
If you win even bigger in tonight’s draw, you could also purchase this two-bedroom, two-bathroom apartment in Fourways, Sandton for R1.25m.
And just like that you have ventured into the world of property investment. But you need to understand the game and choose your rental properties wisely.
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Adrian Goslett, regional director and chief executive of RE/MAX of Southern Africa, says ambitious millennials are often looking for a cosmopolitan lifestyle, usually near urban vibes. There’s also a drive for family homes in suburban rental markets across Johannesburg, Pretoria, Durban, and Cape Town too.
Semigration trends have also created a demand for rentals in coastal and smaller towns, so he advises that investors also consider ‘work, play, live’ opportunities near transport nodes that reduce travel time and are situated in fully-equipped lifestyle estates. In general, South African renters are seeking a better quality of life, greater safety, and a sense of community.
Ultimately, the best way to find out if you are ready to become a landlord is to consult a local real estate professional as well as a financial advisor.
“Owning a rental property can be hard work, but it can also be the foundation to creating wealth over the long term – especially when you have the right support at your side. With a reliable rental agent managing the property for you, you can sit back, relax, and reap the long-term financial rewards of being a landlord.”
Although the tenant population is still under financial pressure in certain price categories, the ongoing interest rate hikes are expected to lead to ongoing improvement in the market. FNB commercial property economist John Loos explains that increases in interest rates would usually have the opposite effect that the cuts had on first-time home buyers, with many holding off on buying until they see what happens with the interest rates.
“Those aspirant first-time buyers may just wait in the rental market a bit longer.”
The residential property industry continues its upward trajectory, and investors are getting in on the action, says Grant Smee, property entrepreneur managing director of Only Realty. However, with the rise of investors choosing to take advantage of low prices and invest in ‘buy-to-let’ properties comes an excess supply of rental properties in areas with high supply and low demand.
Residential rental vacancies in Gauteng are currently sitting at a high rate of 11.9%, while the Western Cape is sitting at a slightly lower 11.4% vacancy rate according to TPN’s 2021 Q4 data.
This shows that, should you be looking to enter the property investment arena, you need to thoroughly research the areas you wish to purchase in and understand their supply and demand dynamics.
When you are ready to sign a lease with a tenant, also think twice before signing the first one who comes your way.
“Placing a tenant in your vacant property might help curb your losses in the short-term, but putting the wrong tenant in can have a lasting negative effect.”
Smee adds that the law protects both the landlord and the tenant’s rights and therefore urges parties to do their due diligence prior to signing a lease agreement.
A tenant’s obligation includes “the requirement to pay rent promptly, to take care of the property and to return the property in the same condition that it was received in”. Landlords, on the other hand, he says, are required to provide the tenant with access to a safe home in good working order. They are also required to maintain the exterior of the building and to protect the tenant’s deposit.
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