Investing in property is a low-risk way of creating wealth and all it takes is one investment to eventually build an empire.
The key here is to apply for a flexi-bond (also known as an access bond). Opting for this type of bond will enable you to use the bond as a savings facility that is accessible at any time, provided there is an excess.
Pieter Piek, Sales Manager for Just Property Invest, says the starting point to building your property empire is finding a tenant and making sure the rental income covers the bond repayment.
Working with the example of a R1 million bond taken out over a period of 20 years at average interest rates, you’d be looking at a bond repayment of around R9 800.
At the same time, you should also be making additional monthly payments over and above the rental income towards your bond in order to save on interest and pay off your bond faster.
If you paid an additional R5 000 per month into the bond and let it accrue over a period of five years, Piek says you’d be able to withdraw the excess of R500 000 to purchase a second property in cash without having to take out a new bond.
Assuming you are able to secure a rental income of R4 500 for the second property, this payment will essentially replace your initial R5 000 per month investment.
“You are still putting the same amount into your access bond and you can now add rental income from the second property. You now have two properties paying off one bond and you still have 15 years left in which to pay it off,” he advises.
Again you repeat the process for another two-and-a-half years, after which point you can withdraw the excess again to finance the purchase of a third property.
READ MORE: Settle your bond in 10 years – here’s how
“Some 10 years from the first purchase, the buyer could have four properties and just five years remaining of their bond repayments. Once the bond is paid off, the rental can go into an investment account,” says Piek.
It’s vital that you do your homework to make sure you’re investing in the right property and location to achieve your investment goals. It’s also advisable to work closely with a good rental agent and opt for newer developments over older ones.
“If you are tempted to buy a low-priced unit that needs work, bear in mind that a great deal of ongoing maintenance will reduce the amount you can put into your bond. It is entirely up to the buyer, of course, but personally I would look at fairly new builds – you might pay a little more but you can be sure you’re getting new geysers, that the plumbing and wiring have been done recently,” Piek advises.