Investment property: Here's how to approach it

You've made up your mind, and your finances are in order. You're ready to buy a second property as an investment, but you're not sure where to start. What should you look out for? How do you make the right decision to ensure a good return and minimal risk?

Buying a property to rent out can be a smart way to build long-term wealth, but it's not without its challenges. Successful property investment requires research, strategic thinking, and some patience. Here's what you should consider before signing on the dotted line.

Don't look in the most expensive area

It's tempting to think a pricier suburb equals better returns, but when it comes to rental properties, this isn't always the case. Expensive areas often come with higher purchase prices and ongoing costs, which can be difficult to recover through rent, especially if demand in that area is inconsistent.

Instead, look for up-and-coming areas. These are typically neighbourhoods seeing new residential developments, infrastructure investment or growing interest from first-time buyers. They often have lower property prices but high potential for rental demand and capital growth.

"Keep your eyes on areas that are growing, not just those that are already established," says Willem Lottering, Principal at Leapfrog Vereeniging. "That's where the opportunity lies for smart investors."

Understand all the costs involved

It's not just about the bond repayment. If you're buying into a sectional title development, you'll need to factor in monthly levies, maintenance costs, and possibly special levies. Rates, taxes, insurance and utilities can also add up quickly.

Always request the latest financials from the body corporate if you're purchasing in a complex or estate. These should include the annual budget, recent AGM minutes, and a breakdown of reserve funds. This will give you a clear idea of how well the property is being managed and whether there are any looming financial issues that could result in unexpected expenses.

"You don't want to get caught off guard by hidden costs," Lottering explains. "A thorough review of the property's financial documentation can save you a lot of stress later."

Assess the area's infrastructure

When buying a home to live in, you focus on what suits you. But with an investment property, you need to think about what will attract tenants.

Does the area have reliable fibre internet? Are there good schools nearby if you're targeting families? Is public transport accessible? Are there shops, gyms or restaurants close by? Even proximity to a large employer or university can significantly boost your rental prospects.

Think about who your ideal tenant is, and whether the area meets their needs. "The more boxes you tick for a tenant, the more desirable your property will be, and the lower your risk of vacancies," says Lottering.

Avoid a maintenance nightmare

A fixer-upper might seem like a bargain, but it can quickly become a money pit. Before making an offer, get a detailed inspection done to understand the full scope of any necessary repairs. Also, think about ongoing maintenance, will you need a garden service, a pool cleaning company, or regular upkeep on older fittings?

While all properties need some level of maintenance, you should know what you're getting into. Overextending yourself on renovations or upkeep can hurt your returns, especially if the property isn't earning income while you work on it.

"You're not buying your dream home, you're buying a business asset," Lottering points out. "It needs to be functional, low-hassle, and tenant-ready."

Work with an experienced agent

A knowledgeable estate agent can be your greatest asset when investing. They'll help you understand local trends, identify high-demand rental areas, and flag any red flags you may miss. A good agent won't just sell you a property, they'll help you make a smart investment.

"At Leapfrog, we work closely with investors to help them make informed decisions based on data and experience, not just emotion," Lottering adds.

Investing in property can offer excellent long-term rewards, but it's important to go in with your eyes wide open. Focus on affordability, research the location, understand your obligations, and surround yourself with the right people.

"Property investment is a long game," says Lottering. "If you buy smart and manage your risks, it can become one of the most rewarding financial decisions you'll ever make."