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buy to let property investments in south africa

7  Reasons why townhouses are great buy to let property investments in South Africa

By Neil Vorster 
buy to let property investments in south africa

You have many options open to you when deciding on a buy to let property investment in South Africa. How do you decide which is the best one?  I could analyse the list of all the types of residential properties open to you, such as houses, clusters, duets, flats, timeshare units, shareblock, farms and vacant land.

But, why not just cut to the chase and tell you why I believe townhouses are best?

 1.  You have dozens of other owners looking out for your interests

A sectional title townhouse complex is governed by a body corporate, which is run by a group of trustees voted in by the owners. In most townhouse complexes, there is a mix of tenanted and owner-occupiers.  Not all the units in complexes in South Africa are buy to let property investments, as more than half are generally owned by the occupants who remain very involved in the management of the body corporate.

The owner-occupiers are the investors friends, because;

  • they make sure order and maintenance is kept
  • they are generally price sensitive and so bring pressure on the Body Corporate to keep levies down
  • they live on site and have a vested interest to ensure the complex is well run

This leaves you the investor to play golf and sleep well knowing that your investment is well looked after.

2.       The caretaker

Many of the larger townhouse complexes have a live-in caretaker.  Buy to let investors please listen up - this relationship is worth cultivating! A caretaker is a veritable mine of useful information.  Tenants who cause a nuisance in a complex and don’t abide by the rules generally are bad rental payers too. It seems to go with the territory. If the caretaker contacts you with regard to your tenant’s behaviour, watch out, you are going to have to keep a tight rein on your tenant.

The caretaker is also the one likely to tip off the police when drug or other illegal activities are evident.

Many years ago I bought a townhouse in a run-down complex that was crawling with Nigerian drug dealers. Meeting the new caretaker helped me make the decision to buy the bargain. One of the first things she did was tip off the police who raided at 4 am. After one or two of those 4 am SAP visits, the drug dealers all vanished to safer territory to ply their trade.  I love caretakers!

3.       The Body Corporate ( BC)

The owners are all members of the sectional title body corporate and elect a board of trustees to run the affairs of the complex. They are entrusted with the maintenance, management and general order of the complex. They are generally empowered to dish out fines to offending occupants, be they tenants or owners. As a landlord, make sure your lease requires that your tenants abide by the BC rules and are responsible for any fines that may be imposed.

4.       Security

Security is a major concern in South Africa and one of the primary attractions of townhouse living, is the secure gated environment they provide. In addition to the 24 hour security, the guards are a wonderful source of new tenants for landlords. Although they are seen mainly as access control, no obvious crime or loud drunken party is going to unnoticed. A well run complex with good security guards is a real asset to investors.

5.       The gardens 

Again the body corporate and caretaker take full responsibility for the upkeep of the gardens. I know of investors who own houses (and the same applies to duets, clusters) whose tenants have neglected the garden terribly. By going on holiday for 3 weeks in summer and leaving your garden un-watered your tenants could carelessly wreck your garden.

6.       Pricing

Townhouse complexes are generally found grouped together, resulting in hundreds of similar townhouses in a concentrated geographical area. This enables one to very easily establish the market-related purchase prices and market-related rentals before you buy. Knowledge is power, and having the foreknowledge of achievable rentals is essential to successful investing.

7.       Funding of buy to let property investments

Townhouses are generally cheaper than houses which make the purchase prices, and hence barrier to entry, lower. Various benefits unique to townhouse complexes like security and communal entertainment facilities ensure that the  rental returns for the investor are generally a higher than for houses and clusters.

Townhouses are great buy to let property investments and remain my favourite investments for entry level and seasoned investors alike.
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Here are answers to some frequently asked questions:

What about Student Accommodation as an investment?

What about Body Corporate levy increases? 

About the Author Neil Vorster

Neil Vorster is a property investment coach, investment author and co-founder of Organic Growth. Aerobatics pilot and cycling nut.

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Please leave your comments and questions below
    • Hi MIsh, Sorry I can’t help you in Durbs directly.
      We can facilitate your investment in Jhb though. Through Targer realty we can offer a full service of sourcing and managing your investments in the financial heart of the country.

  • Chris, I think you will find some of your answers here.

    I am not in favour of paying your bond off early, let inflation reduce your bond to a negligible amount. Eg, a Townhouse that I bought 12 years ago with a 100% bond for R 130 000. Now it is worth about R700 000 and with normal bond repayments, I would be owing about R 100 000. (I now owe 1/7 th of its value!)

    My strategy is to keep adding properties to my portfolio by accessing the equity in my existing properties and excess rental income to pay deposits and fund shortfalls in new properties. When I reach a certain certain age I will let the tenants pay off all my bonds and live of the rental income.

  • Hi, how does a townhouse buy to let investment compare to an apartment/flat buy to let investment? Would this be if similar investment merit?

    • Hi Liesl
      They are quite similar actually.
      Apartments are a bit more stand alone…you often don’t have an active body corporate management company looking after the block, so you lose some of those benefits.
      But as investments go…very happy with them as long as the basic property fundamentals are adhered to.

  • Hi Neil.how do you i make sure that i pay less tax with my property portfolio of three houses.thank you ,collen

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