The South African real estate market is one that investors depend on to increase their wealth and grow their portfolios.
This booming industry relies on a steady economy, a thriving tourism sector and stable interest rates. We explore some of the smartest investment opportunities with different financing options.
What are the financing options for buying a property?
When preparing to invest in a property, you may choose to use a conventional home loan, existing home equity, independent lending institutions, business partnerships or community and public programmes. Each of these options comes with its own set of regulations and it is imperative that you understand the individual processes.
How to finance investment property in South Africa
Home loans
One of the most straightforward ways to create funds for your investment property purchase is to apply for a home loan. If you intend to use the rental income you receive from the proposed property towards paying off the loan, banks will not consider this in your application. Therefore, showing proof of your ability to repay the loan and your credit score is vital to being approved.
Home equity
Many investors own their private residences outright, or have made significant inroads into paying down this debt. This is known as home equity. You can use the portion of your home you already own to leverage equity for a loan from a bank or credit provider. With this option, you are allowed to use the prospective rental income from the investment property to pay off the loan. An important fact to be aware of is that financing property in this manner will have tax implications. It is best to consult with a tax accountant before you decide to use your home equity to invest in an additional property.
Independent lending institutions
Financial loans in South Africa can either come from national banks or accredited authorities. The latter ensures that people who may not be able to qualify for a bank loan still have the opportunity to receive a loan to be paid back on their terms. This option comes with a lot of fine print and in some cases, increased interest rates. Consider your expected cash flow before approaching a private lender for investment. Take the risks and the sureties you will have to provide into account.
Invest with partners
Share the responsibility and the advantages of property investment with like-minded individuals. Ensure that each partner’s goals align with the nature of the investment. Collective investments require expectations to be handled, targets to be met and accountability to be shared. As is always the case, it’s worthwhile making use of the property investment tools at your disposal.
Community and public programmes
Public programmes, sometimes funded by the government and at other times by private organisations, provide opportunities for investors looking to serve a community’s needs in some way. A great example is organisations that will help investors purchase and refurbish properties in inner city areas as part of great urban regeneration schemes.
Investing wisely for better opportunities
With such a dynamic financial landscape, investing in commercial, industrial, mixed-use or residential properties can be a solid choice for diversifying your income stream. When considering the funding options available to you, take a pragmatic approach that ensures your investment protection. Seeff understands the world of property investment. Let us guide you in exploring fitting solutions, financial advice and real estate market insights. Contact us today for more information.
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