Property Investment for Beginners: Types of Investment Properties in South Africa

by Balwin Properties
April 14, 2022

When buying an investment property in South Africa, one will need to consider many factors before deciding on the type of property they would like to purchase. There are several different types of investment properties that investors can choose from, each suited to different needs and preferences. For example, investors who are just starting with their investments need to consider the benefits of each type of investment property, and also how difficult it will be to manage them. Also, South Africa is a great place for many different types of investment properties due to its strong economic growth potential.

South Africa features some of the most modern cities in the world with excellent locations that offer all the amenities needed by the modern-day investor. A combination of good education, dynamic labour market growth, and high salaries largely contribute to the demand for real estate in South Africa. Here are some of the different types of South African investment properties that can be acquired by investors based on their requirements:

1. Residential Investment Property

This is one of the most popular types of real estate around the world for investors to acquire. This type of investment property is most often sought by individuals and families since they generally want a place to live in over time and not overprice their homes wishing for capital growth. This means, that it is mostly bought for family use or as a holiday property.

This type of investment property offers many benefits to investors since the majority of them feature capital growth and relatively low vacancy rates. Also, residential investment properties don’t require as much management as commercial ones do (though you will still need to perform minor repairs now and then).

2. Commercial Investment Property

This type of investment property is mainly geared towards individuals who have a higher budget and are looking forward to gaining from the high business activity in South Africa, which is a major source of capital growth. Along with this, commercial properties often come fully leased to tenants, so there’s no need for weekly visits by investors to collect the rent. The only downside is that since this type of investment property attracts businesses, it leads to major repair and renovation costs.

Also, to qualify for a loan to buy commercial properties, investors are required to have proof of income from the same source for the past two years which might not be a viable option for all interested buyers.

3. Retirement Investment Property

Retirement investment properties are one of the most interesting types of property for investors especially if they want to retire in South Africa. While these types of properties often come fully furnished and with a pool, they can also be rented out by investors to tourists just like any other commercial property. This will bring passive income which is a great addition to traditional pension plans and investments.

4. Agricultural Investment Property

Investors interested in the agricultural property sector will be pleased to know that South Africa has some of the best climates for farming across the world which means plenty of opportunities for capital growth through doing what people have been successfully doing for hundreds of years- farming. There is always a demand for agricultural products, so investing in this sector will ensure you have a steady income stream. This type of investment property also requires little to no management. Lastly, it can be used as a primary residence or for holiday purposes due to its isolated nature.

5. Holiday Home Investment Property

Holiday homes are another popular choice among many real estate investors, particularly those who wish to acquire holiday home rentals as an additional source of income. A holiday home rental can be an excellent way for investors to earn extra income, especially during the holiday season.

Due to a recent interest in holiday home rentals among investors, there has been a surge of people converting their homes into rental properties and making a quick buck from this venture. However, one needs to carefully consider the implications involved before going ahead with such an investment as it may not be as easy as it seems. A holiday home rental business requires high levels of management and the ability to deal with difficult situations. This is why it is important for potential holiday home rental business owners to carefully consider if they have the time and resources to effectively manage their properties.

There are some other good reasons why a holiday home rental business may not be successful, such as if there is a huge difference in the average income levels of the country where the property is located compared to the area where you live. Another reason why investing in holiday home rentals may not be as successful is because many people are now looking for cheap deals on holiday homes instead of the luxury type. This means that there are fewer tourists who are willing to rent your property, so it would be difficult to generate a good income from this venture.

6. Investment Off-Plan Properties

The final type of South African investment property that investors may be interested to consider are the ones built off-plan. Off-plan properties are generally made available for purchase before construction is complete which can offer many benefits for investors. The most significant benefit of buying at this stage is the lower purchase price which offers more capital growth potential after completion done by an approved contractor who specialises in building investment properties.

This type of investment property is also popular among investors as they can easily resell off-plan properties once construction is complete at a higher price.

Do You Want to Invest in Property? Not Sure Where to Start?

If yes, then you might be interested in high return on investments property developments from Balwin Properties, a dynamic company offering apartment units in premium developments at affordable prices. Our properties are in prime locations with high rental potentials in South Africa’s major cities (Cape Town, Johannesburg, Pretoria and Durban). Contact us about the latest updates on new developments.