Investment Property: Buy-to-Let

Private Property South Africa
Denise Simpson

With the property boom of recent years, many astute investors are adding residential

properties to their investment portfolios, and are enjoying a rental income as

well as fantastic capital growth. Even in downward economic cycles and high

interest rate times, property is still the best investment you can make.

The Banks are more than happy to lend on properties that are specifically for

buy-to-let, depending on the client's affordability and provided that the

property is suitable security.

One bank in particular, has a specific product for buy-to-let and the criteria

are listed below:

  • Minimum loan amount of R150 000.

  • Maximum repayment to income ratio - 30% (excluding rental income). If a

    10% deposit is paid, ratio to income can go up to 40% of the potential

    rental income.

  • Term of up to 360 months (home loan must be paid up by age 65).

  • Minimum gross income (single or joint) of R30 000 per month.

  • Loan value up to 100%.

  • Register higher amount for future use.

  • Interest rate - fixed or variable.


  • Self employed and temporarily employed

  • Building loans

  • Overtime earners

Other banks will lend up to 90% and use 80% of rental to be included in

disposable income for qualification purposes.

If you take cash investments against brick and mortar, a property portfolio will

outstrip the latter by far. To ensure your property investment is tax efficient,

it is advisable to take out a home loan as the expenditure can be used as a tax

deduction, for example:

  • Interest debited against the loan

  • Home owners insurance

  • Rates and taxes, or levy

  • Maintenance and upkeep can also be used as an expense against income

Investors must bear in mind that when purchasing property for buy-to-let,

most banks will not take future rental income into account to qualify for the

loan; you must qualify in your own capacity.

As with any investment, timing is the most important factor so even if your

rental is not sufficient to service the bond repayment, the capital appreciation

over time will beat the traditional cash investment by far.

In a nutshell, when buying investment property, consider the following:

  • Your property investment should be tax efficient

  • Rental properties are increasingly in demand

  • Ensure you register a bond up to 150% of the value of the property for

    access to future capital appreciation on the property, without incurring

    extra expenses.

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