I bought my first home when I was 24. Here's how you can do it too
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* This article first appeared in our Property360 digital magazine
Nthabiseng Makgabo was a month and a half shy of her 25th birthday when she took her first step onto the property ladder – a first step towards achieving her dream of owning a portfolio of properties.
After all, as a property-studies graduate, buying property was naturally her next goal – one she achieved in 2018. This is her story.
How did you know it was the right time to make a move?
Affordability was a big deciding factor. As a young professional in Johannesburg, rent can be very expensive. At the time, I was sharing accommodation because I couldn’t reconcile spending R7000 a month on a one-bedroom apartment.
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I worked in Sandton and, believe it or not, that was the cheapest and most decent apartment I could afford close by. You would be surprised at the poorly maintained places people are willing to lease to desperate tenants, all in the name of location.
I needed to live close to work because I was working for a fast-paced team and would often work late. But because I did not yet have a credit score, I could not buy a car. An apartment, then, was my next best bet, although I had always had my eye on the prize of buying a place of my own.
What other factors pushed you to take the plunge?
I knew that it wasn’t financially sustainable to rent an apartment for that amount of money. I also knew that you can’t always rely on roommates and I would be stranded if mine left me – which inevitably happened one month before our lease was meant to end.
So, I started building a little nest egg to put together a deposit. One of my other key deciding factors was the fact that my mom and I didn’t have a house we owned. We didn’t have a home. I felt obliged to make sure that we had that.
Even if she lived in another province, I wanted her to know that she had something she could call her own, something that we could fall back on.
How did you prepare for such a big purchase, especially at such a young age?
I really started ramping up my search about nine months before the actual purchase. At that time, I was sharing an apartment with two other girls in Sunninghill. We split the three-bedroom, two-bathroom apartment rent three ways, which was about R3300 a person a month.
I needed to continue living there if I wanted to afford to buy my own home. As I did not have enough money for a substantial deposit, I knew I would need to get 100% financing.
I also knew I didn’t want to buy something that would incur transfer fees, so either a new property or one that would cost me less than R900000 (the then-value that was exempt from transfer duty) were my options.
How did you start your search?
Knowing my budget helped me narrow my search in terms of location and property type. For R900000, I could not buy anything reasonable in Sandton, so I had to cast my net wider. I wanted a property that would grow in value. I wanted to be able to let it, and at least cover the bond with its rent, while I continued to share with my friends.
I also wanted something that was easy to let to people, so a two-bedroom apartment was a good idea as these are viable lets. I actually wanted to buy a three-bedroom apartment but it was not in my budget. So, with my parameters in place, I put down my requirements and searched the internet.
I did viewing upon viewing and, honestly, I couldn’t find anything I truly loved. Then, one day, about six months into searching, my colleagues were discussing a new development in Midrand and I decided to have a look.
The property had two bedrooms and was in my price range. I thought about it for a while and crunched the numbers. I knew roughly how much rents in the area were and I calculated my bond amount and the additional charges such as rates, taxes and levies. The numbers checked out and were within my monthly budget, so I went for it.
What did you learn from the experience? And did you make any mistakes?
It was definitely one of the most nerve-wracking decisions of my life. I was terrified of the amount of debt I was signing up for and the length of time I would be paying it off. I made a lot of mistakes.
My calculations were off. The rates, taxes and levies ended up being double what I had initially expected, so prepare for that when buying in a new development. They will try to sell you a low base on additional costs to make the transaction more attractive.
I also chose to get an agent to manage my property because I was scared my tenants would not pay if they knew how young I was. That was an expensive decision. I ended up paying R3000 extra every month to manage the property when I had expected to pay R500.
If you could go back and do it again, what would you change or do differently?
I wouldn’t change anything. These were all valuable, and expensive, lessons that will help me in my next purchases. Nothing makes you learn faster than a R36000-a-year bill. What is your next property goal? I intend to buy property again. This time, I am eager to develop something for the lower LSM groups.
What advice do you have for other young aspiring property owners?
My advice is that you must really do your homework before you get into a transaction. Run your numbers again and again. Make sure that you can take the impact if costs increase by large margins.
Today, I see a lot of estate agents trying to convince people to buy property because interest rates are low. It really upsets me because I feel that is misleading. Interest rates fluctuate. You need to make sure you know you can afford your property if rates go up again.
Also, just because your bank says you can afford a R3 million house, it does not mean you should buy that house. Definitely shop around for a bond. Your primary banker may not have the best interest rate. Shop, compare and negotiate your rate down.
Life is long and your bond will outlive a lot of your relationships. Make sure you are ready for the commitment. Last, don’t rush. I bought my apartment and carried on sharing with my friends for years because it was more economically savvy to do that. Your path may be different. Make sure you run your own race.