Many young investors are making the wise decision to buy property rather than rent – and the current low interest rates mean lower installments and a greater chance of getting bond approval.
Call them savvy! They often stay with their parents until they’ve saved up enough for a deposit. With rent becoming more expensive, they may even find that their bond installment is in fact less than the rent being charged in the areas they’d choose to live in.
Pay Prop’s figures indicate that residential rentals rose by an average of 10.8% in 2013 and with a continuing shortage in rental stock expected, the figure is set to rise further this year. On the other hand, according to Absa, small house prices rose by only 4.3% for the whole of 2013 up to end-September, with growth up in Q3 to close to 2%.
Young buyers are adding important impetus to the market. Security is top of their list and they tend to prefer property investments that require little maintenance with modern fittings and that offer a lock-up-and-go lifestyle. Homes in ‘good’ suburbs are also an option but they’re very conscious of what’s a fair price, security features and tend to look for well-maintained properties.
Top tips on how to build a property investment portfolio
When deciding how to buy investment property, young investors should:
- Take a long-term view with property investments – the market will move through cycles so sit tight and be patient.
- Consult the experts – IGrow Wealth can assist young investors in identifying distressed properties and below market value properties that will create income and offer capital appreciation in the future.
- Have a strategy – to create a successful property portfolio have a clear plan to steadily add property investments as your income increases.
- Take it slowly – start with one property, gear it right and when it’s working aim to expand your portfolio.
- Consider different types of property investments – from sectional title and freehold to renovation opportunities and auction or distressed properties.
- Buy in different areas – always spread your risk.
- View your own home as part of your portfolio – avoid the mistake of buying bigger and better each time you move up a rung on the career ladder, rather set your sights on a moderate home with small bond repayments and buy other property investments that generate rental income.
- Never sell unless you absolutely have to – the costs of buying and selling are significant when you add up Capital Gains Tax, estate agent commission, conveyance fees etc.
- Keep your eye on income – capital growth comes second, the more income your property investments generate the sooner you can invest in another property.
- Learn, grow and educate yourself! Network with the right people and attend a monthly IGrow seminar covering various topics.
An investment in knowledge always pays the best interest – Benjamin Franklin
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