I know so many people who romanticize the idea of having an investment property. It’s always a sure bet – buy a second property, fix it up and watch the money roll in. In theory, this is a great idea and I know so many people who’ve been so successful at this.
I used to hold this view until a few years ago. I bought, what I thought, was a great investment property in a well-kept complex in a great suburb in northern Johannesburg almost a decade ago. I’d done my homework and the property ticked all the boxes. There was no way I wouldn’t get tenants and realize great capital growth over time. Not so fast. To say that this was my biggest financial mistake would be an understatement. This investment was a nightmare in so many ways. The biggest headache of them all had to be the tenants. And, I always managed to get single, middle-aged career women with children (and pets -lots of them) in this property. They never paid their rent on time and left my property in the worst state when they eventually vacated. I was also very strained financially as I had underestimated the cost of maintaining the properties (especially when it wasn’t let out). I eventually sold it and didn’t make any money from it.
Knowing what I know now, I wouldn’t do it again. Ever. But for those looking to do so, here’s what I learned:
- When choosing an investment property, rather go for the smaller properties in high demand areas. The data (and experience) shows that bachelor and 1 bedroomed properties yield the best returns for a number of reasons – my property was a 3 bedroomed townhouse
- Be prepared for months without rental and plan for them accordingly. I was overly optimistic and didn’t do this and I experienced some of the worst financial times of my life because of it
- Don’t bank on property agents to chase delinquent tenants – this was such an upsetting realisation for me. I’d been paying an agent for almost two years when I got the call from him asking me if I knew that my tenant had vacated my property. This was a month after the fact and rent was due. Needless to say, the agent referred me to their terms and conditions and…I’m sure you know how that story ended. Even when I tried to manage the tenants myself, the results were the same.
In hindsight, I wish I had invested all that money in listed property or the stock market in general – no maintenance costs, no pesky tenants and no regrets (given how well the markets were doing at the time!).