How to use your first bond to build property equity

Published October 2026

Article insights:

• Use your first home loan to build property equity by making extra bond payments, reducing interest costs and strengthening your financial position for future property investments.
• Leverage an access facility strategically to potentially fund a deposit or property-related costs, while remembering that additional lending remains subject to affordability and credit assessments.
• Research investment properties carefully by comparing rental yields, tenant demand, location, employment opportunities, schools, transport and amenities – not just the purchase price.
• Prioritise positive cash flow and tax efficiency by ensuring rental income can cover bond repayments and ownership costs, while factoring in rates, levies, insurance, maintenance, vacancies, taxes and potential Capital Gains Tax.
• Think long term when growing your property portfolio: use rental income and capital growth to build equity, reduce debt and create a sustainable foundation for future property investments and long-term wealth.

Improved affordability and a supportive lending environment are creating more opportunities for first-time buyers to enter the property market. According to BetterBond’s September 2026 Property Brief, first-time buyers maintained their record average purchase price of just over R1.4 million set in July. The impact of declining interest rates after they hit record highs in 2023 and 2024 is evident in the improved approval ratio for home loans granted. At the end of August, BetterBond’s approval rate stood at 64.5%.

“For first-time buyers, the current buyers’ market – where the appetite for lending has increased and the national bond approval average stands at 63.5% – creates an opportunity to look beyond homeownership and consider how their first property could become the foundation of a longer-term investment strategy,” says Bradd Bendall, BetterBond’s National Head of Sales.

Bendall suggests the following strategy: buy your first property, build equity in it over time, use your stronger financial position to help finance an investment property, and then use the income and equity generated to support further portfolio growth. Building a portfolio means considering rental demand, cash flow, tax and the costs associated with owning each property:

Set up an access facility

Linking your home loan to an access facility can give you greater flexibility when building equity in your property. Any additional payments you make into the bond may be accessible later, subject to the terms and conditions of your home loan, says Bendall.

This can potentially provide a source of funds that can be used towards a deposit or other costs associated with buying a second property. Importantly, accessing these funds does not mean that you are automatically approved for a new property loan; your affordability and credit profile will still need to be assessed when applying for additional finance.

“Furthermore, by paying a bit extra into your bond each month, you will not only pay off the loan amount sooner, but you will also reduce the interest payable.” The faster you reduce the outstanding balance on your home loan, the less interest you are likely to pay over loan repayment period, explains Bendall. At the same time, building property equity with your first property can strengthen your position when you eventually apply for finance for another property.

Over time, this strategy can be repeated. Rental income from an investment property can contribute to your overall cash flow, while any additional funds may be used to reduce debt and build further equity. However, portfolio growth should always be guided by affordability and the performance of each property, cautions Bendall.

Do your research

Before buying an investment property, compare rental yields in different locations and look closely at the factors that drive tenant demand. “Consider employment opportunities, transport corridors, schools and other amenities, as well as the supply and demand for rental properties in the area.” Student towns such as Stellenbosch and Potchefstroom, for example, enjoy high rental yields that make them sought after investment opportunities, adds Bendall.

The latest Absa Homeowner Sentiment Index (August 2026) notes that many respondents surveyed see property as a “safe long‑term investment that has the potential to appreciate and help build wealth”. However, they also emphasised that the value of an investment property depends on “location, demand (rentals, tourism and students) and confidence in politics, services and the future”.  Almost 60% of respondents said they believed property is always a good investment, while 37% believed now is a good time to buy for investment.

When considering an investment option, it is important to distinguish between gross rental yield and the actual return you can expect after costs, notes Bendall. Gross rental yield considers the annual rental income relative to the property’s purchase price but does not account for expenses such as rates and taxes, levies, insurance, maintenance, management fees or periods when the property is vacant. “Opt for a property where the rental income and potential for long-term capital growth justify the purchase price and associated costs.”

Cover the bond and associated costs

Do your calculations before buying an investment property. In this way, you can be sure the expected monthly rental income can comfortably cover the bond repayment and other ongoing costs, including levies, rates, insurance and maintenance. “It is a good idea to ensure the rental income is paid into your original bond so that you can pay off the bond sooner,” says Bendall.

Putting surplus rental income towards the original bond can help reduce the outstanding balance faster. As home loan interest is calculated based on the outstanding balance, reducing the capital amount can reduce the interest charged over time. This can potentially accelerate the repayment of the original bond and help the investor build equity faster. Bendall adds that reducing the capital balance can also improve the investor’s overall financial position when applying for future finance. “The additional payment also creates a buffer should there be a market shock or an unexpected shortfall in rental income because of extended vacancies.”

Consider the tax implications

Tax is another important consideration when assessing the potential return from a buy-to-let property. Rental income is generally taxable, but as a landlord you are entitled to deduct certain expenses related to the maintenance and management of a rental property. These allowable expenses, such as repairs and maintenance, can help reduce your taxable rental income.

Investors should remember, however, that not every property expense is automatically deductible and that the tax treatment of interest and other costs can depend on the circumstances. Also, when selling a rental property, you may be liable for Capital Gains Tax (CGT) on any profit made from the sale. Bendall explains that CGT is calculated based on the difference between the selling price and the property’s base cost, adjusted for certain expenses and allowances. “Professional tax advice can help investors understand their position and calculate the after-tax return of an investment.” The objective is not simply to find a property that generates rental income, but one that makes financial sense after all costs and taxes have been taken into account, says Bendall.

Building property equity requires long-term thinking

Property investment is a long-term strategy, and investors should avoid making decisions based solely on short-term market movements. “Over time, a well-considered property can potentially generate rental income while also appreciating in value. Rental income may increase as market conditions change, while capital growth can contribute to the investor’s equity position.”

For first-time buyers, the goal should therefore not simply be to own a second property as quickly as possible. Instead, the first bond can be viewed as the foundation of a broader investment strategy, concludes Bendall. “By buying well, paying off debt, building equity, understanding rental yields and managing cash flow carefully, homeowners can potentially turn their first property into a springboard for a portfolio that generates income and builds long-term wealth.”