Learning about Multifamily in South Africa

31 Replies

Hi Everyone!

This is one of my first posts here on BP asking for some advice and help. I successfully purchased my first single family property last year, and it has been working well and is pretty much running on auto pilot now. But having had it for awhile now I became increasingly disenchanted with the scalability of the single family strategy.

So I have systematically started studying up and teaching myself about multifamily investing and I am getting to the point where I want to start looking at potential properties and numbers to get a feel for the market.

But as I started looking into it I have found it exceedingly hard to find any information about the South African multifamily market. The usual public sites like privateproperty.com and property24 does not service this field (at least not as far as I could find), and there is also no South African equivalent of something like LoopNet.

Is there perhaps anyone that has knowledge in this field and that can perhaps point me in this direction. Any advice would be greatly appreciated!

  

@Wihan VanWyk I have no clue about S Africa, but you could try looking for apartments that are currently for rent and calling the landlords for those units and ask them those questions. Some of them may be willing to help you. That's probably where I would start if there is nothing else available. You may even find one that wants to sell some of their properties.

@Don Spafford Thank you very much for your response!

That is a great idea, and seems like a good starting point.

S Africa I think has a lot of potential in this area but it's shocking how little information is out there!

Thanks again! :)

Hey @Wihan VanWyk ,

I have a long term ambition to pick up one rental in Cape Town so I can justify spending Januarys there as a business expense! I love Cape Town. 

Since CPT is such a tourist city maybe you could also consider a simple apt in the city bowl which you could rent out as an Airbnb. 

That said - and without having done a lot of research - it seems like Cape Town could be a good area to invest so long as the laws are favorable (I think they are to foreigners owning property) and if the price/rents ratios are acceptable. Certainly spending dollars so acquire properties denominated in ZAR should be favorable from a forex standpoint. 

 @josh stack 

I have recently started thinking about Airbnb after having heard a bit about it on a BP podcast. It's something I might pursue in the future, but living abroad currently makes something that's management intensive like Airbnb a bit of a challenge.

In terms of SA, Cape Town (and the Western Cape) is an excellent place to invest compared to the rest of the country. Although at the moment the prices are quite high, that being said the province is receiving a huge influx of people and so demand keeps rising.

I am not too familiar with laws in terms of foreign investors but I recall reading that it is pretty favorable. But It's best to look into this yourself to be safe.

Because of the high prices currently, price/rent ratio and be tricky but it is still manageable in many areas and it's not hard too find good deals from time to time. Something like Airbnb definitely has the income potential to justify prices if done correctly I think.

I suggest you look at property24.com and private property.co.za as these are the sites I use to keep tabs on the market.

If you have any further questions about the SA market feel free to reach out to at any point :)

I went to South Africa last year and absolutely loved it. I think there's definitely a market for Airbnb and if the numbers make sense, you can outsource the management. You can setup an august lock, there are courses that teach you how to handle 90% of things remotely. You need a guestbook, check-in procedure, automated emails, etc.

The biggest expense will be cleaning and you can add the cost of that onto the booking. You will need to pay someone to "manage" the unit and be your on the ground support in case anything is needed but I'm sure you could pay someone a small percentage of your profits rather than a monthly fee.

It is something that I have strongly considered but with it being so far away, I'm not sure how often I would even get there. Anyone know if there would be investor mortgages there for foreigners or would they be expecting all cash?

Capetown is absolutely beautiful and would be a great area however it's also pretty expensive.

If you go the single family route, it could still be profitable on Airbnb because you could rent out rooms individually or as an apartment but you would need to be sure the bookies weren't overlapping.

Have you considered Durban. They had some pretty nice areas, there's the convention center, etc. It's more affordable and I think there is still enough tourism and business travel to make it profitable.

@Wihan VanWyk, You are right, property24.com and private property.co.za focus on single family homes. They mean the needs of the general public. It’s very rare to find multifamily apartments advertise there.

When it comes to finding multifamily units to invest it’s a combination of getting in touch with estate agents, networking and checking auctions. With time you will find a suitable opportunity.

There is currently a property boom in Cape Town and the Western Cape area. The prices of property and even rentals are very high compare to other metros. Surprisingly every other person in Cape Town has become a property expert.

I am based in Pretoria and I invest around Gauteng. The property market here is just about normal.

I was in Cape Town recently and contacted an agent about the possibility of buying something. I was told that if you plan to rent to foreign visitors a condo in a new building might be best. Her reasoning was that visitors are (understandably) concerned about security and condos have much better security than single-family homes.

I would also be interested in learning how other US investors plan to finance purchases in South Africa. Local mortgage rates are 10%+ and US banks tend not to lend for foreign purchases.

@Lillie MAnon  Thank you for the great advice. Perhaps I will look into it some more and take into account some of the things you've mentioned here.

I haven't really looked into Durban or much of the rest of SA yet. Since I'm not currently based in SA focusing on my hometown is much easier for now.

@Taka Sande Thank you very much for your response. Sadly SA doesn't seem to have much of a presence here on BP yet so it's nice to hear from a local investor.

I am a relatively new investor, and thus I am still building up my own network. Where can I look for auctions like the ones you mentioned?

You are right, Cape Town is going through quite a boom now, and that makes it even harder for newer investors to gain a foothold sadly.

Thanks a lot for your advice and best of luck up there in Gauteng! ^^

I am in Cape Town 👍🏻 I have seen one or two apartment buildings coming up for sale.

I am just waiting for my earned income to stabilize before getting into multifamily apartments.

I have 3 apartments that have good equity and I am here if anyone is interested in communicating further.

Hi Wihan, I run a commercial property company in Cape Town and Ingrid J is correct, if you are looking for multifamily homes then a commercial property broker is probably going to have that type of stock. 

We recently had a client put an offer on a 16 unit building with 3 small commercial spaces. We also had a 8 unit and 6 unit residential building on our books. Unfortunately, however, this kind of stock does not come up very often.

If you search on property24.com  then select property type "commercial property" - that is generally where you could find multi family units listed.

Otherwise send me a PM and we can get in touch.

I also hope more Capetonians start to use BP, its such an amazing platform I really enjoy the BP podcasts the guys are brilliant!!

@Ryan Hosie Hi Ryan! Thanks so much for your response and reaching out. I agree there is way too few South Africans here on BP.

I've scoured P24.com and PrivateProperty.co.za and I've kept an eye on the commercial property sections, as I'm aware multi family is classified under commercial. But I've seen so few listing on there I've started to wonder if it's the correct space to be looking at all.

Thanks for the suggestions for the broker as well, this does seem to be the most efficient way of doing things.

Please keep an eye out for a pm from me. :)

Good day,

I am a property professional from Pretoria and am willing to assist anyone wanting to invest in property in the Gauteng region, South Africa. We have a large portfolio of property developments for sale where you could purchase a single apartment or an entire block within a security estate with excellent rental returns. 

@Josh Stack,

The current laws in SA are favourable in terms of property investment in SA but the local banks will not finance foreign investors, unless you take up temporary/permanent residence permit.

Feel free to PM me for further details.

Originally posted by @Sunil Khusal :

Good day,

I am a property professional from Pretoria and am willing to assist anyone wanting to invest in property in the Gauteng region, South Africa. We have a large portfolio of property developments for sale where you could purchase a single apartment or an entire block within a security estate with excellent rental returns. 

@Josh Stack,

The current laws in SA are favourable in terms of property investment in SA but the local banks will not finance foreign investors, unless you take up temporary/permanent residence permit.

Feel free to PM me for further details.

Hi Sunil,


Are there any minimums to get invested in ZA?  How about forex restrictions on repatriating profits in USD back to the US or elsewhere out of South Africa?

Hi Josh,

I am not so clued up on forex requirements or restrictions in respect to property investment but I will surely find out and will post here soon.

Thanks.

I would expect there to be commercial real estate brokers. Build relationships with them to find the deals. 

Hi all. I am also based in South Africa, but I am only starting out in real estate investing. I also realised that almost every advice on RE seems to point more to multifamily compared to single family houses. However, as Wihan put it, they seem to be very elusive.

I guess my question is, can one start out with multifamily or should I start small to learn the ropes first?-