Is buying a rental property the right investment for you?

Mail & Guardian

09-07-2025

James Carvalho, Director and Financial Planning Specialist at Chartered Wealth Solutions. (Image: Chartered Wealth Solutions)
B
y James Carvalho, Director and Financial Planning Specialist at Chartered Wealth Solutions
Over the years, I've often been asked if owning a rental property a good idea? The short answer is, it depends. The decision is rarely straightforward and should be made in consultation with your financial planner.
The appeal of owning a tangible asset is strong, but many people dive in without considering the full picture. Before you invest, ask yourself:
Do I have the financial means to purchase and maintain the property – especially if I need a bond, or will I be using after-tax savings?
Is this property meant to be a lifestyle asset, part of my retirement plan or simply a surplus investment?
This decision should be part of a well-thought-out financial plan.
Here are my top five key considerations when buying a rental property:
1. Upfront costs are significant
If you're buying an existing property, you'll need to pay transfer and bond registration costs – often a large upfront expense. These costs are not usually covered by the bank and must be funded with after-tax money. However, if you're buying off-plan (ie, from a developer), you typically avoid transfer costs.
2. Tax implications
All rental income is fully taxable. When you eventually sell the property, you may also be liable for capital gains tax. Don't forget that if you're acquiring a property, you need to make sure your will is up to date or that you have one drafted. Property is a fixed asset and should be properly accounted for in your estate.
3. Tenant risk
The income only works if your tenant sticks to the lease agreement. If the property is vacant, even briefly, you're still responsible for all the expenses, including the bond repayment. Consider how long you could carry those costs without rental income.
4. Growth and rental increases
Ideally, your property should grow in value and act as an inflation hedge. But for it to truly work for you, the rental must be market-related and adjusted on the anniversary of the lease agreement. Many owners leave rental prices unchanged just to retain a 'good' tenant. While this may avoid hassles, it erodes the long-term value of the investment. Also, capital growth depends on location and market cycles. For example, between June 2023 and June 2024, the national average house price growth was just 3.2%. Cape Town was the top performer, while Gauteng experienced a decline of -1.1%.
5. Tenants can make or break the experience
There's the dream tenant, one who pays on time, takes care of the place – and then there's the nightmare tenant, one who is constantly late and frequently damaging the property. Over time, even enthusiastic landlords may grow tired of managing the stress and maintenance of a rental property. Many of my older clients no longer have the energy for late-night calls to, and chasing rent from, tenants.
What's the alternative
?
If your interest lies more in property as an asset class than in being a hands-on landlord, there are other ways to invest:
Property shares on the JSE or international exchanges.
Property income unit trusts.
REITs (real estate investment trusts), which offer exposure to commercial and industrial property without direct ownership hassles.
These vehicles allow you to benefit from property market returns without managing tenants, maintenance costs or bond payments.
Like all asset classes, property comes with risks – vacancy, unexpected costs and market volatility. Whether you're buying bricks-and-mortar or investing via the markets, make sure it aligns with your financial goals. Your financial planner can help you weigh the trade-offs and help you make a decision that's right for your life stage and investment strategy. For more information, visit