The Hidden Costs of Buying Property: What Investors Need to Know
Investing in property is one of the most reliable ways to build long-term wealth, but many first-time investors underestimate the true costs involved. Beyond the purchase price, there are several hidden expenses that can significantly impact your cash flow and profitability. In this article, we’ll break down the most important hidden costs to be aware of and how to plan for them effectively.
1. Transfer Duty and Legal Fees
What is it?
Transfer duty is a government tax payable when buying property over a certain value. Additionally, legal fees for conveyancing attorneys (who handle the transfer process) must be paid.
How much does it cost?
Transfer Duty Rates (2024 – South Africa):
Example:
For a R2 million property, the transfer duty is calculated as:
R12,375 (for the first R1,512,500 bracket)
6% of R487,500 (R2,000,000 – R1,512,500) = R29,250
Total Transfer Duty = R12,375 + R29,250 = R41,625
Additional Legal Fees:
Conveyancing Fees: Typically R15,000 – R50,000, depending on the property value and law firm.
Service Providers:
Legal Practitioners Fidelity Fund (for conveyancer verification)
STBB Attorneys, Tonkin Clacey, MacRobert Attorneys (popular South African property law firms)
2. Bond Registration and Initiation Fees
What is it?
If you’re financing your property through a home loan, the bank charges bond registration and initiation fees.
How much does it cost?
Bond Registration Fees: Varies based on property value but typically R10,000 – R40,000.
Initiation Fee: Banks charge a once-off fee of up to R6,037 (for bonds above R1.5 million).
Service Providers:
South African banks such as FNB, ABSA, Standard Bank, Nedbank, Capitec
3. Rates, Taxes, and Levies
What is it?
Once you own a property, you must pay ongoing municipal rates, taxes, and (if applicable) sectional title levies.
How much does it cost?
Municipal Rates & Taxes: Typically 0.6% – 1% of property value per year.
Sectional Title Levies: For apartments or estates, expect to pay R500 – R5,000 per month, depending on amenities.
Example:
For a R2 million home, annual municipal rates could be R12,000 – R20,000, plus sectional title levies if applicable.
4. Maintenance and Repairs
What is it?
All properties require regular maintenance, from small repairs to major renovations.
How much does it cost?
General maintenance: 1% of property value per year (e.g., R20,000 per year for a R2 million home).
Major repairs: Unexpected costs such as roof leaks, plumbing issues, or structural damage can range from R10,000 to R100,000+.
Example:
If you buy an older home, you may need to replace a geyser (R8,000 – R15,000) or repaint the exterior (R30,000 – R60,000). This is where it becomes handy for you to be a practical and hands-on individual. You can save a tremendous amount of money if you can do these repairs by yourself (Just make sure to do a good job!)
5. Vacancies and Tenant Issues
What is it?
If you’re renting out your property, there may be periods when it remains vacant, resulting in lost rental income. Additionally, problem tenants may delay payments or cause damage.
How much does it cost?
Expect 1-2 months of vacancy per year in the worst-case scenario.
Eviction costs can range from R10,000 – R100,000 in legal fees.
Example:
If your rental income is R10,000 per month and your property remains vacant for 2 months, you lose R20,000 in annual revenue.
6. Estate Agent and Marketing Fees (When Selling)
What is it?
When selling your property, you’ll pay an estate agent commission and possibly additional marketing costs.
How much does it cost?
Estate agent commission: 5% – 7.5% of the selling price.
Professional photography, staging, and advertising: R5,000 – R20,000.
Example:
If you sell your home for R2 million, estate agent fees could be R100,000 – R150,000.
Service Providers:
Real estate agencies like RE/MAX, Rawson, Chas Everitt
We work with the most extraordinary agents across the country, so get in contact with us if you are looking for somebody who is willing to go the extra mile
7. Compliance Certificates and Utility Deposits
What is it?
Before transfer, sellers must provide compliance certificates, and buyers may need to pay utility deposits.
How much does it cost?
Electrical Compliance Certificate (ECOC): R1,500 – R5,000
Plumbing Certificate: R1,000 – R4,000
Beetle/Fumigation Certificate (for coastal properties): R500 – R2,000
Utility Deposit: Municipalities may require R3,000 – R10,000 as a deposit.
Special Note:
If you're buying an older home, these costs could easily add up to R10,000+.
Conclusion: Plan Ahead to Avoid Costly Surprises
While property remains one of the best investments, hidden costs can add up quickly. Smart investors budget for these expenses to avoid financial strain. The key is to factor in all costs upfront, work with trusted service providers, and build an emergency fund to cover unexpected expenses. By doing so, you’ll maximize your profits and avoid costly mistakes.
Would you like help calculating your potential property costs? Check out our free Property Investment Calculator!