Regard Budler | CEO | BetterSure Financial Consultants | mail me |
There is a noticeable shift taking place in South Africa’s property market. However, it does not follow traditional routes. Owning a home no longer necessarily means living in it. Increasingly, millennials and Gen Z are renting in areas that suit their lifestyle. At the same time, they buy property elsewhere as investment opportunities.
This approach, often called the “rentvestor” approach, reflects a younger generation’s changing priorities. Millennials and Gen Z are thinking more flexibly about money, mobility and long-term security.
Affordability challenges in major urban centres such as Sandton, Cape Town and Pretoria also shape these decisions. Younger buyers carefully choose the suburbs where they want to live. However, they also use homeownership to generate income elsewhere. The rentvestor approach essentially helps pay off a dream home.
A generation rewriting the rules
Rather than stretching themselves financially to buy in high-demand areas, many millennials and Gen Z purchase in more affordable regions. They intend to rent those properties out for income. At the same time, they continue renting in locations that match their lifestyle preferences. This strategy allows them to enter the property market without becoming tied down.
According to Investec, approximately 1 million of South Africa’s 6.8 million homeowners own more than one property. Around 40% of these homeowners fall within the 35-49 age group. Gen Z is also becoming increasingly prominent in this trend. These figures further illustrate how millennials and Gen Z continue to reshape traditional ideas of property ownership.
There is a mathematical case for rentvesting that’s worth unpacking. Under certain market assumptions, a R100,000 deposit on a R1 million home means your investment grows on the full property value, not just on the cash you put down.
Over 20 years, with a tenant helping to service the bond, that same R100,000 can build roughly R3.2 million in property equity. By comparison, investing that amount at 8% in a balanced unit trust could generate around R466,000. This is the quiet power of gearing. It’s the difference between saving towards a dream home and steadily building one, one tenant payment at a time.
Investment property comes with a different risk profile
Owning a rental property differs from owning the home you occupy. This distinction often catches homeowners off guard. Once tenants enter the equation, missed payments become a possibility. Property damage can also occur. In addition, vacant periods may reduce returns.
Tenant-related risks include damage caused by improper use of the property. Issues can also arise through tenant negligence. Therefore, homeowners should conduct regular property inspections. They should also familiarise themselves with the conditions of their home cover. This approach helps avoid complications during claims processes that result from preventable tenant behaviour.
Smart strategy, or risky business?
Rentvesting can provide earlier entry into the property market. It also creates opportunities for passive income over time. As investors expand their portfolios, they move closer to achieving their dream homes. Older properties can eventually help pay off newer acquisitions.
The appeal of rentvesting becomes particularly clear in high-cost areas such as Cape Town’s Atlantic Seaboard. Industry estimates suggest that owning a R2.5 million apartment in these areas could cost around R32,000 each month. This figure includes bond repayments, rates and levies. By contrast, renting a comparable property could cost closer to R18,000.
For millennials and Gen Z investors, that R14,000 difference creates opportunity. They can redirect those funds into building property portfolios in more affordable areas. These regions may also offer stronger rental outcomes. This practical approach explains why millennials and Gen Z increasingly embrace rentvesting as a wealth-building strategy. However, rentvesting is not without challenges. Success depends on careful planning and realistic budgeting. It also requires a clear understanding of the risks involved.
Many homeowners assume insurance automatically covers missed rental payments. However, this is not always true. Insurers generally only cover loss of rental income when the property becomes uninhabitable. Such situations usually arise from sudden or unexpected events, including fire or flooding.
Protecting the modern property investor
The rise of rentvesting is creating a new generation of first-time landlords. Many are learning the distinction between traditional homeowners’ coverage and the broader protection investment properties often require. As property ownership models evolve, education becomes increasingly important. Investors need a better understanding of risk management, tenant responsibilities and long-term protection.
As the property market evolves, rentvesting highlights broader changes in attitudes toward homeownership. Millennials and Gen Z increasingly value flexibility and investment potential. However, they must also understand the responsibilities attached to rental property ownership.
Economic uncertainty and tenant-related risks remain important considerations. Therefore, investors should ensure that appropriate protection is in place. Rentvesting can help South Africans navigate an unpredictable economy. It can also support the gradual building of long-term financial security for the future.
