In the good ol’ days, all the kids in the neighbourhood would gather around the brightly coloured blocked board. We would fight about who gets to be the dog and who has to settle for the car and then we would proceed to fuse luck, chance and wits in a fun way that resulted in us building large property portfolios, and even owning hotels and train stations. Of course, there could be only one Monopoly winner, and he or she would walk away with heaps of cash and one broad smile.

So it’s no surprise that so many of us grew up thinking that we could and would own multiple investment properties one day. Yet, as we matured, we quickly realised that neither life nor the property market is a game. And we wonder about it… Can investing in property truly be “safe as houses” in the current turbulent economy? Will it be worthwhile, and how long will you have to wait to truly realise the value of your investment and get a great return? In fact, what are the chances of you getting a great return at all?

These are valid concerns, and good questions, and understanding the property market in South Africa, as well as what investment property is and how this investment works, is absolutely vital to your financial success.

The property market in SA

Unlike investing in stocks, which can be very volatile since they show large increases and decreases in value over a short period of time, the SA property market (and the property market in general) mostly shows slower, more steady ebbs and flows. This means that property investment is also best undertaken on a medium to longer term basis ranging between 10 to 15 years.

By making this longer term property investment commitment, you are in a better position to wait out the market lows and ride the market highs, ultimately generating small returns as you rent the property out and enjoying large profits once you sell it.

Understanding property as an investment

There are four main types of property investments, namely:

  • A holiday home, which you can rent out for additional income or simply use to provide your friends and family with cheap or free holiday accommodation
  • A rental property which you buy with the main aim of letting it until such time as it is most favourable to sell it
  • A business property, which is any property in which business is conducted, such as a bed and breakfast or even a retail shopping complex
  •  A property purchased purely for its long term investment value as your family home.

From these four main property investments, investors normally extract value in the following ways:

  • Real estate appreciation – this is when you sell your property for more money than you bought it
  • Cash flow income – the money you earn from you property from rent  paid
  • Ancillary real estate investment income – this includes making money from additional services offered to investment property occupants, like renting parking bays, or offering a laundry service to the occupants of a block of flats

So, is it worth it?

Everyone you know will have advise for property investment but really what you need is to make a wise investment into something that will eventually make you a profit (just like that kid who won the Monopoly game). But like with any type of investing, it is vital that you remember that there are no guarantees and with property you always have to wait a little longer for the rewards.