South Africa is currently seeing the emergence of a new kind of property investor — the “rentvestor”.
Well, this term was trademarked by LJ Hooker and is defined as someone currently living, as a tenant, in a rented property but who is also a landlord of a property that they own and rent out.
Take for example the following Allies’; a young policeman and teacher rent a flat in Kenilworth close to both their work places. They could not afford to buy a three bedroom flat in Kenilworth, however, they could afford to buy a 3-bedroom freestanding house in Strandfontein which they can then rent to a family.
Or Jessie; a young communications manager living in her parents’ home in Tamboerskloof. She enjoys the hustle and bustle of the city life but could not afford to buy there on her single income. Her rentvestment is a bachelors’ apartment in Kraaifontein, who she is renting to another young professional from Stellenbosch.
Rentvestors are people who may not be able to afford to buy in the areas where they live and work, but are so determined to become property owners that they seek out more affordable locations with a promising future, and buy homes that they can let to others. The rentvestor is typically a landlord themselves while remaining a tenant, which is a new take on the buy-to-let model.
Rentvesting is very popular, but not limited to, young couples or young professionals in their late 20’s or early 30’s who love their lifestyle and don’t want to relocate from where they are renting but they are not yet in a position to purchase property in these areas.
It’s a strategy which enables buyers challenged by housing affordability to have the best of both worlds - a foothold in the property market while continuing to live where they want.
Rentvestments are more prominent in urban cities such as Cape Town and Johannesburg. This is because the property market in these cities have a greater demand and the rentvestor is likely to see a greater return on their investment due to the rising prices in the property market.
Rentvestors are not only tapping into the residential property market but also into other niche markets like student accommodation, or storage units, or even Airbnb/Holiday homes in popular destinations surrounding these cities.
1. Always look for properties that are below market value.
2. Seek out properties that have high growth potential.
3. Identify areas where there is a great rental demand.
4. Tenant-Landlord relationship is regulated in South Africa under the Rental Housing Act; so, before you take this leap be sure to read the Act.
Rentvestment is a strategic, win-win model of property investment when executed correctly. It enables South Africans to have the best of both worlds by living where they choose while investing in their financial future elsewhere.
Contact our conveyancing attorneys in Cape Town for assistance with your property purchase.
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