Areas and Places

5 reasons to invest in Stellenbosch’s student accommodation

The launch of the ultimate in luxury private student residence in Stellenbosch, The One, comes at a time when demand for student accommodation is at an all-time high in SA.

This upmarket investment into one of the Western Cape’s most popular towns allows first-time buyers to own income-producing property. Additionally, parents of students about to embark on their tertiary education have the chance to turn a necessary accommodation expense into a nest egg. 

Here are five reasons a buy-to-let property, specifically student accommodation, is one of the most effective ways to grow your passive income for financial freedom:

High demand at SA’s ivy-league equivalent

Stellenbosch is one of SA’s most popular Cape Winelands towns with a considerable lifestyle appeal, but it is also home to SA’s Ivy-League equivalent, Stellenbosch University.

With a 30 000-strong student population, however, this globally acclaimed University’s campus is massively oversubscribed, only offering some 6 500 student beds. As a result, the One’s 509 luxury apartments, made up of eight meticulously designed unit types ranging in size from 23m2 to 31m2, are a sought-after investment address in Stellenbosch.

Prestigious location with ongoing investment appeal

A prime location geared for continual development and expansion ensures the capital growth of your property investment.

Who wouldn’t want live, work and study in Stellenbosch, a premier destination of choice layered with old-world charm, internationally renowned for its natural beauty and educational institutions?

The authentic culture of its vast student population means the area is fast becoming a significant innovation hub in SA, intent on attracting investors and blue-chip corporate companies alike. As a result, many top businesses are already headquartered here, bringing a vibrant mix of creative professionals.

Continuous income for an investment that pays for itself 

A student rental property is one of the few investments that can bring immediate and continuous cash flow.  And with the right investment, your rental will cover your bond payment and sometimes leave a bit of extra cash over for added investment into the bond to decrease the payment terms. Or you can save it and use it to maintain your property. 

Average apartment rentals for Stellenbosch are between R10 000 To R15 000. 

Additionally, The One apartments are in a class of own with a resort-style pool and state-of-the-art co-working and designer lifestyle spaces in a fully managed development – meaning you will more than clear that monthly bond payment with rental income as you enjoy the total annual capital growth on your asset.

Increases in value from day One  

Not only does your property start earning immediately, but it also increases in value. For example, SA Property industry data shows that sectional title sale price averages in Stellenbosch have seen a 15% increase in 2021.

With a conservative average estimate of 6% capital appreciation, your buy-to-let apartment, which any student would love to call home for the duration of their studies, could be the investment that further fuels your passive income. Moreover, as your existing asset pays for itself and continues to grow in value, it also improves your credibility for additional investment and bond approval. 

Tax incentives to purchase properties

There are many ways to minimise tax within your property portfolio. For example, section 13sex allows people with five brand new properties to claim 55% of the cost as a tax write-off over 20 years. 

SARS allows a R2.75 million tax deduction to an investor who has purchased five residential properties at R1 million or more each. 

To qualify for a section 13sex tax incentive:

  • The units must be new. 
  • No existing or second-hand properties will qualify for the tax incentive. 
  • The taxpayer must own at least five residential units.
  • The units must be in SA.
  • The taxpayer may not live in the property as their primary residence, making it an ideal buy-to-let investment.

Add to this, property owners can deduct non-capital expenses from their tax return, including:

  • Rental agent’s commission or fees for securing a tenant.
  • Advertising costs of marketing the property.
  • Levies, municipal rates, insurance fees, water, and electricity.
  • Interest paid on the home loan, if applicable.
  • Cleaning costs, garden services and security.
  • Repairs and maintenance costs. This excludes renovation improvements deducted from capital gains tax when selling the property. 

There couldn’t be a better time to invest in rental property in Stellenbosch!