Property investing: Weighing up pros, cons of buy-to-live vs buy-to-let

Property investing is on the radar of many South Africans, thanks to falling house prices and low interest rates.

Read also: Buyers’ market with real house prices set to fall for 5 more years – property cycle expert

Lloyd Hobson

The buy-to-live vs buy-to-let decision is personal, and experts advise buyers to purchase where property values are stable and will increase over time.

In the long-term, property investing is rewarding for patient investors, according to experts.

Factors to consider when buying to live

Lloyd Hobson, Leadhome agent, says those who choose to buy property to live in should take certain factors into consideration. These include:

  1. Assess your needs so you buy right. Is the property going to meet your medium and long-term goals? Think of life stages, and the possibility of a growing family.
  2. Location. Rather buy a cheap property in a good location as this will grow in value over time.
  3. Get pre-approved first before shopping for a property. Pre-approval gives you an indication what a financial institution can lend you. Once your home loan application is approved, be sure to get the best interest rate on your home loan. It is best to shop around when applying for a loan in order to compare interest rates.
  4. Shop with your eyes, heart and head. Just because you ‘love something’ doesn’t mean you must have it or overpay for it.
  5. Check and inspect the property to make sure there are no major defects, and potential major maintenance required. Look at the ‘bones’ of the home rather than the furniture of the current owner.
  6. Make a list of things that are non-negotiables when buying property, but also try to remain open-minded.
  7. Be careful not to overpay for the area you are buying in. This is where research in the form of market analysis comes in handy.
  8. Factor in transfer costs in addition to home loan repayments.
  9. Check for work that may be need to be done before moving in. This could be painting, cleaning the pool or clearing the garden, for example. Budget for this amount before even signing on the dotted line. Be sure to budget for moving costs as well.
Pros Cons
South Africans love real rights (ownership) and owning a property gives you this


Owning property comes with financial responsibilities, and often over a long period of time


As the owner you have the freedom to do as you please with your property


Property maintenance can be ongoing and expensive at times


Benefit of enjoying use of owned asset instead of using and paying off the landlord’s investment  

Property is a fixed asset and a long-term commitment. Moving abroad, for example, becomes tricky when you still have a fixed asset in South Africa



Paying off a home loan gives you an investment, and property provides a solid investment over the medium to long-term


Property cycles move fairly slowly. It’s therefore a long game which requires lots of patience
Property can be used as security to access further finance. An access bond enables the owner to draw from the loan providing liquidity for other expenses like buying another property. It is not easy to merely ‘cash out’ should you need to – selling property is a process


Property investing  should be carefully thought of. Hobson advises buyers – especially first-time buyers – to take their time and not panic buy.

Read also: First-time buyers dominate home buying activity, with Free State outstripping Gauteng

Potential buyers should first assess what their needs are in a property. For example, is it going to be good to live for the next few years, when the children grow up etc.

“Buyers should keep in mind that security is key. It is important to investigate the neighbourhood security in the area one intends buying into,” says Hobson.

Investing in buy-to-let properties

In 2019, approximately 30% of all properties purchased in South Africa were for second or more properties. This is according to Geoffrey Lee, managing executive for Home Loans at Absa Retail and Business Bank.

Lee says in 2020,  people are buying property to live bringing the figure down to around 15% of all properties purchased.

Read also: Is buy-to-let investing in SA still a good idea? Here’s what the data says about tenants

“This reduction indicates that investors are more tentative in their purchases resulting from the economic impact of lockdown. First-time buyers are also entering the property market given low rates and zero transfer duties for properties below R1 million.”

Pros Cons

A well-chosen property investment may provide both rental income and capital growth


Property is very illiquid and cannot easily be sold to raise cash, such as shares
There are tax benefits to investing in property  

Tenants can cause damage to the property which could cost more to repair than the deposit held


The growth in property value enables the investor to borrow against the increased equity for other investments or other purposes


It can be difficult to evict a tenant, meanwhile, the investor/owner needs to continue paying the property monthly expenses


Emotional motive – one can invest in an asset that can be seen and touched, unlike most investments


The increase in rental may not keep up with increasing costs such as interest rates. As a result, this may possibly require the investor to pay into the property


The property value growth may not keep up with inflation


Property investing – particularly buy-to-let – has financial implications which buyers need to be aware of.

Geoffrey Lee

Lee says when building a rental income portfolio, the following are critical:

  1. Ask about the property costs – this includes levies, rates and taxes as well as municipal costs.
  2. Buy in an area where property values are stable and will increase with time.
  3. Check that the area you are buying into has a high tenant demand. This enables you to source tenants easily, and keep property vacancies down.
  4. Ensure you calculate your expected rent, home loan payment and costs (levies, rates and taxes). Remember to include a provision for properties repairs and vacancies.
  5. Have savings, or sufficient cash flow to cover any gaps in rental, or unexpected maintenance or repair costs.
  6. Stretch your home loan payment to see the effects of an interest rate increase in 3-5% worst case scenario.

Lee says Absa Home Loans enables investors to build wealth through property. Investors get 100% Loan-to-Value when purchasing buy-to-let properties.

However, he says the assessment criteria applies. This takes into consideration affordability, previous credit behaviour, property valuation, and whether it is being purchased in the individual or through a legal entity.

“Investors can include the rental income that they are currently receiving in their affordability. Those with two or more existing properties can add the expected rental income for the property being financed to their affordability. Absa is the only bank that offers Future Rental Income in the South African market,” says Lee.

The bank has partnered with TPN Credit Bureau to provide additional tools and services to landlords. Investors can effectively screen tenants, and use lease agreements with all current legal requirements.

Read also: Buying property now more affordable – insights from BizNews Property Talk

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