How to start a property portfolio (with only R10k)

Article summary

• South Africa is currently a buyers’ market, making it a good time to invest in property.
• You can invest using OPM (Other People’s Money), compensating for your limited capital.
• Start off small by investing in modest buy-to-let properties that generate rental income.

Property has always been considered a safe long-term investment. If you have money to invest, property is generally the thing to invest in if you want to be confident of growing your profits over time.

And South Africa is currently a buyers’ market, because property prices are gradually dropping as supply outstrips demand.

Add to that, interest rates are still at their lowest in several decades, thanks to a succession of interest rate cuts by the South African Reserve Bank in 2020.

For all these reasons, now is the time to consider investing in property. But can you hope to start a property portfolio with only R10k to your name? Yes, and there are a number of ways to do so.

How to start a property portfolio

You don’t have to have a massive amount of capital to start your property portfolio. Just R10k is enough. Methods include:

1. OPM – Other People’s Money

It is exactly what it says: you use other people’s money to invest in property. It may sound crazy but this is how seasoned property investors do it.

This usually involves partnering with other investors to purchase a property. There may be a quid pro quo to the partnership, for example if you have a good credit record and your partner doesn’t, but they have the cash to put forward. They’ll be supplying the cash and you’ll handle the application, since your better credit record will improve your chances of being approved for a loan.

2. OPP — Other People’s Property

This means the seller themself funds your purchase of the property, basically by transferring the property to your name under the agreement that you will pay them the value of the property over time.

3. Buying shares

You can use your R10k to buy shares in a property, either on the stock market or through a broker.

4. Applying for a home loan

A home loan means the bank will fund your purchase of the property. There’s the option of a 100% home loan, which means you won’t have to pay a deposit on the property and can fund it completely through monthly installments.

Alternatively, you can use your R10k as a deposit and thus earn yourself a home loan with lower monthly installments and more favourable interest rates.

Using a home loan comparison service such as ooba Home Loans will give you the best chance of securing a favourable loan, regardless of your starting capital. They will submit your home loan application to multiple banks, allowing you to compare deals and choose the package with the lowest interest rates.

The first step: Buying affordable property that generates profit

This is the key to successfully starting a property portfolio. Buying affordable property that generates outlay from the start.

Buy-to-let is the go-to option for investors who are just starting out. You acquire a property that generates rental income, and use that rental income to pay off the purchase price.

Of course, this is the real trick, identifying properties that are going to be generating rental income consistently. You can get an idea of prospective rental yield on a property by looking at rental prices for other properties in the area.

Then you start off small, acquiring a modest one-bedroom unit for example. Gradually you can build up your portfolio from that foundation.

Take advantage of the buyer’s market

Investors should move quickly to take advantage of the current state of South Africa’s property market, as it won’t be a buyers’ market forever.

As mentioned, ooba Home Loans, South Africa’s largest home loan comparison service, can help you secure lower interest rates by submitting your application to multiple banks. Coupled with the rep rate already being at a record low due to aforementioned interest rate cuts, this makes property investment a powerful venture even for those with limited capital.

ooba Home Loans also offers a range of tools that can make the home buying process easier. Start with our Bond Calculator, then use our Bond Indicator to determine what you can afford. Finally, when you’re ready, you can apply for a home loan.