The most important factor is deciding what your long-term goals are.

By Gareth Collier

Jul 21, 2022 00:54

My partner and I want to invest in the real estate market. We are currently renting an apartment. In the medium term, our objective is to become the owner of our principal residence and to have some investment properties. We want to have the principal residence under one name and the investment properties under the other name in order to have better access to bond financing.

The question is, what should we aim to acquire first? Do we pool our money for deposit/transfer fees to buy a principal residence or do we buy investment property, wait a few years and then use it for a deposit on our principal residence?

The question of whether to buy a primary residence or an investment property first is extremely subjective and depends on many factors and variables. The first question you need to ask yourself is why you specifically want to own investment property, versus investing in the stock market. Buying an investment property is really putting all your eggs in one basket, especially if it represents a large part of your overall wealth.

I’ll address this by mentioning the pros and cons of owning a primary residence versus owning an investment property:

Principal residence


  • You might see owning your own home as a life goal. You may feel like you’ve worked hard for the privilege of owning your own home, and that’s a great goal to achieve.
  • Once your property is paid off, you will own your own home and later in life this property could give you flexibility in terms of retirement housing or provide you with cash downscaling.
  • You get a capital gains tax allowance on your main residence of R2 million, or R1 million per spouse if you are married in community of property.

The inconvenients:

  • Moving is an important decision and buying more makes it even more important. People usually buy a residence for the medium to long term, so as a buyer you need to have a pretty good idea of ​​what the future might hold for you for a reasonable amount of time.

Investment property


  • If you bought a house in a good neighborhood and there is a demand for that property, you can sell it for a good price or you can get good rental income from that property to initially pay off the majority of the mortgage deposit .
  • The expenses you incur in owning the property (deposit, rates and taxes, etc.) may be deducted from the rental income received for tax purposes.

The inconvenients:

  • You have to decide whether to deal directly with your tenants or appoint a rental agency to manage the property for you – which naturally costs money. This means that you will either have to increase the rent or give up some of the rental income.
  • Owning a property has responsibilities. You must maintain the house and keep it in a rental condition. Major issues can become costly and time-consuming.
  • You need to consider the growth potential of the property you are looking to buy compared to that of other investments. For more details on this, please follow the link to the following article: Structuring your bond consider your missed opportunity costs.
  • Depending on the property, you may have to pay some of the mortgage deposit yourself on departure; it is quite rare for the rental income to cover the entire mortgage deposit from the outset.

The pros and cons listed above are just a few factors you need to consider when making this decision and from the above you will see that it is a very subjective decision. The most important factor is deciding what your long-term goals are and whether buying a primary residence or an investment property supports those goals. Ideally, we suggest you consult an independent financial advisor who can guide you through the decision-making process.

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