• ETF Enthusiast

I turned R128k into R312k in 4 years with this investment

At the end of 2016 I took occupation of a shiny new apartment, which I bought off-plan from a developer. R85 000 is what departed from me almost a year before that as a deposit. I was young, 25 in fact, 85 000 was a lot of money for me. It was the majority of what I had saved up for the past 25 years of my life.

I didn’t know it at the time, but I was taking a big risk. I wasn’t familiar with the area I was buying in, other than what I had learnt from working down the road for the past two years. I never had to pay rent for the past 25 years, and my salary at the time although qualifying me for the bond would leave little to nothing left at the end of the month. Don’t get me wrong, I was chuffed, but I now had another R500 000 that I owed the bank for the foreseeable future. That was a big responsibility.

I intended to live in the flat, but I knew that this was a short-term plan and that I would play the role of the landlord for the majority of the time I owned it. I lived in it for 6 months before moving out.

Here we are, almost five years later, and it’s time to take a stab at calculating my return on investment since my first tenant took occupation in mid-2017.

The investment period:

My first experience with being a landlord involved a rental agent. To their credit, they provided me with a wonderful tenant who would never miss a rent payment over three and a half years and leave the flat just as I had left it. To their discredit, the agent took R678 from me per month without responding to emails, conducting inspections, or providing the tenant with important communication from the body corporate. I removed them from the equation at the end of the first lease and have managed the flat myself ever since.

After my first tenant moved in at the beginning of July 2017, I had to fund a shortfall on the properties expenses relatives to its income. This lasted for the first full one-year lease. Remember that agent? Well, their commission accounted for half of the value of this shortfall.

After the first 12 months, I finally got to meet the tenant my agent had so wonderfully procured for me. My confidence and finances were in a much better position from the second year.

For the next 28 months (my first tenant occupied the flat for 40 months in total), the rent I received cover all costs associated with the property (bond costs, levies, rates, life insurance, bank fees, and maintenance costs).

Profit was always used to pay down the debt in my home loan and build up a capital balance in the access bond.

There has been only one month since the first year in which I didn’t make a profit (September 2020). This was due to a month vacancy due to a transition between my first tenant and newly appointed second tenant. Fortunately, there were more than enough funds in my access bond to cover the expenses for this month.

The below table is a view of the shortfall in year-one which was paid out of pocket, and the additional profit over and above my expenses in years 2-4 which were additional contributions into my bond.

Income vs expenses while running the investment property

Calculating the returns on the investment:

There are two ways that an investment property can grow on your personal balance sheet:

1. the more capital is repaid, the less you owe the bank

To date over R85 000 of the capital balance of the bond has been repaid (strictly calculated over the four-year investment period and not including my original deposit). The initial bond was just over R500 000.

Bond capital repaid during investment period

After four years of bond payments and additional capital payments as a result of profit from rental income, I am left with an outstanding bond balance of around R415 000 at the end of June 2021.

Outstanding bond balance = R415 000

2. The property becomes more valuable over time (based on how much I could sell it for)

The biggest challenge with properties is liquidity. We certainly aren’t living in central Amsterdam. I often cringe when I drive past large apartment complexes which are littered outside with “For Sale” signage from every estate agent you can imagine. A sad reality in a lot of areas at the moment.

Currently on property24 like-for-like flats are selling for around R895 000. On average property in South Africa sells for around 12% less than the asking price[i]. As a general guide, it is probably best to be conservative with the expectation of what you can sell a property for. That leaves me with a sale value of around R787 600.

Total Selling Price = R787 600

I have also needed to adjust the value of my flat from occupation to the beginning of the rental/investment period. Working this backwards from the current selling price using the growth figures and stripping our the first 7 months in which I occupied the flat I get to a property value of R610 706.

Property selling value over the investment period

If I can sell my flat for R787 600 after four years, simple maths shows that the value of this asset has grown in value by 29% over this period. Working this backwards equates to an annualised growth (growth per year) of 6.6% over the period.

You know the conversations which happen around the braai, where Jaco announces that you can never go wrong with an investment into property and shares how he bought a place for R1m three years ago and sold it for R1.5m last week. Well as we all know it’s never that simple.

Within that sale, Jaco spent plenty of money trying to sell the place and likely has a capital gains tax bill waiting for him after his next tax return.

The most important value is the value that you receive in your bank account when it’s all said and done. The value after estate agent fees, bond settlement fees, capital gains tax and any other expenses in disposing of the property.

I now need to calculate my costs to-date including the costs which I will inevitably face when selling the flat.

Calculating the costs (investment value):

Total costs involved in the investment to-date come up to R111 877, however if we adjust these costs to the start date of the investment period (once tenant took occupation) at an opportunity cost of 12% p.a. these costs are in fact R128 838.

I will not include the running costs incurred while I occupied the flat for 6 months as these are not valid towards the costs of the investment period.

Adjusted investment costs

Total investment costs = R128 838

Cost of disposing of the asset (selling the flat)

Agents commission on sale = R39 380 (This is the worst-case scenario. I could bring this down by using a company like Eazi Real Estate who charge a flat fee of R33 000 to sell a flat of this value)

Capital Gains Tax = R16 303 (online calculator used)

Settlement of outstanding bond balance = R415 000

Bond cancellation fees (how is this even a thing?) = R5 000

Total costs to sell the flat = R475 683

Next, I need to determine the current equity value the investment is worth. This is the money that I would receive into my bank account if I sold the property and settle all of my outstanding costs mentioned above.

Calculating my return:

Investment Equity

Property selling price (conservative value) – total cost to sell the flat (incl. bond settlement) = total equity

R787 600 – R475 683

Total Equity = R311 917

Real return

The total investment value of R128 838 (my adjusted costs over the past four years) is now worth R311 917. This means I have made R183 079 of profit in this investment to-date. That is a total investment growth of 142.1% and a 24.9% annualised growth over the past 4 years.

Total Investment Costs

R128 838

Total Equity

R311 917

Total Return


Annualised Growth (4 years)



I am very happy with my returns up until this point. The results affirm this assets place in my financial plan and my plans to use it when I transition away from full-time work.

Within these numbers is luck. I can admit that I didn’t do enough research upfront when making this investment. The price stood out as a good deal to me, and it was a value I knew I had a good chance of getting a bond approved on. I would definitely do more research on aspects such as the financials of the body corporate in any future purchase.

The income from buy-to-let properties often takes many years to start covering the expenses of the investment. The quality in the deal of the price I paid helped me to turn a profit in year two.

Finally, I was fortunate that my first tenant who I did not place was reliably, treated the property well, and stayed for a long period of time.

Within these numbers is hard work. Although I spent nothing on maintenance in the last fours years, there have been times that a lot of work was required. As of September 2021, I have now had to go through three tenant procurement processes[i]. I have held many one-to-one viewings and have learnt lessons to develop a very strong procurement process to manage applicants and ensure that my risk is as low as possible with who I decide stays in my property.

I am always on-time, efficient and reasonable in my communication with my tenants, and I strike a good balance when maintaining our mutual interests.

I still think an investment property should be a small percentage of your investment portfolio. This is difficult as a property is naturally a very valuable asset. It is an investment that holds considerable risks as the factors which can impact it are very concentrated.

My focus with my current monthly savings is not to pay off my bond but to reduce this asset’s contribution to my total portfolio by investing in ETF’s (my main retirement plan).

[i] https://www.businessinsider.co.za/almost-no-sa-house-sellers-are-getting-their-asking-prices-heres-what-homes-are-going-for-now-2019-7 [ii] After procuring a second tenant in anticipating of my first tenant giving notice, they subsequently pulled out 1 month before move-in date. This let to two full procurement processes for my second tenant. As at September 2021 my second tenant has moved out and I have a new tenant moving in on the 15th of September.

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