This is not the ultimate guide because the property market moves through many cycles that are influenced by several economic factors, but it will give you practical knowledge about how to invest in multiple properties and build a portfolio with confidence.
Affordability
To succeed in property investment, you need to understand your financial position. [In Part One][1], you were guided to create a spreadsheet showing where your money goes, which may have revealed potential savings. It may take some time to [save enough for a deposit][2] on a second property, or you may already have savings you can use towards your first investment.
No matter how excited you are to start viewing properties, be realistic about what you can afford. There are no guarantees that you’ll secure a tenant immediately after registration, nor that the first tenant will be the right fit. Always prepare for vacancies and potential maintenance costs.
Remember, the home loan is in your name, which means you are responsible for all monthly repayments and associated property costs. Many people become nervous about this step, fearing they may not manage two home loans — one for their residence and one for an investment property. This is why detailed planning is essential.
Can you manage two home loans?
If you already have a bond on your primary residence and want to buy a second property as an investment, you’ll likely need to apply for another home loan. Provided you have a strong credit score and a good relationship with your bank, you will be seen as a favourable candidate. However, securing a second home loan can involve stricter checks than when buying your first home or upgrading to a new one.
Banks are cautious about additional property loans because they want assurance that repayments will be made on time, in full, and consistently. They are generally not concerned that the property will be rented out, unless you can prove a valid lease agreement before approval — which is often not practical. Banks will consider several factors, such as:
- Your ability to afford repayments on both bonds if necessary
- Your current debt levels and how effectively you manage them
- Your creditworthiness — including your credit score and payment history
If you believe you might not qualify for a second bond, there is another approach: using the equity in your existing property to help fund the second one, even if the first is not yet fully paid off.
Tapping into your existing equity
Most property investors already own a primary residence with a bond. Although the property is registered in your name, the bank technically retains ownership until the loan is settled in full. As you make monthly repayments, your ownership share — or equity — increases. Given that most bonds are structured over 20 or 30 years, this can take time, but property values generally rise over that period.
Equity is the portion of your property that you truly own. It is based on the property’s current market value minus the amount you still owe the bank.
Do not confuse this with the original purchase price or the loan amount granted. For example, you may have been approved for a bond of R800 000 five years ago when your home was worth that amount. Today, the market value might be R1 million. If you’ve repaid R500 000 and still owe R300 000, your available equity is R700 000. The calculation is:
Current value (R1 000 000) – Amount owed (R300 000) = Equity (R700 000)
You can use this equity to fund your first investment property. However, you may not be able to access the full amount, as lenders typically limit access to around 80% of available equity to manage risk. Equity can be a powerful tool when applying for a new bond and can be used for:
- Paying the deposit on the second property, improving your approval chances and possibly securing a better interest rate
- Covering property-related costs such as conveyancing fees, bond registration, transfer duties, and utility deposits
- Settling other debts to improve your credit profile before applying for another loan
- Contributing towards the deposit on a new primary residence while retaining your existing home as a rental
The risks of using your primary property’s equity to buy an investment property
When you withdraw equity from your primary home, the amount is added back to your bond balance. This creates certain risks that must be planned for:
- Your monthly repayments may increase, or your loan term may be extended
- You could pay more interest over the total bond period
- You’ll be responsible for two home loans if a tenant defaults or the rental property remains vacant
- Property market fluctuations could reduce the value of both properties
Always run your numbers using a reliable affordability calculator and discuss your financial situation with a qualified bond originator or financial advisor before proceeding.
Fact check: In South Africa, most major banks (including FNB, Standard Bank, Nedbank, and Absa) require a minimum credit score of 600 to 650 for a second bond, and loan-to-value (LTV) ratios are generally capped at 80–90% for investment properties. Transfer duties apply to properties valued above R1.1 million [as per SARS rates][3] (2024/2025 tax year).
By understanding your affordability and the power of equity, you can plan strategically and build a sustainable property portfolio that grows in value over time.
