Most South Africans will make two massive investments in their lifetime. One is buying a house and the other is paying for their children’s education.
Both cost a lot of money, but they are also the two smartest investments you are likely to make.
Over the next 10 weeks, we will take a long, hard look at one of these investments: buying and owning your own home. We have a panel of experts (see sidebar) who will take you through the entire process from planning to looking around, to applying for a bond and managing it.
Just in case you are not sure about taking that big step towards owning your own home, here are 13 great reasons being a property owner is an advantage:
– It will be yours. You can renovate the kitchen and bathrooms, paint them pink if you like, but not if you’re in a complex. If that is the case, you will have to abide by the rules of the body corporate, but the interior is yours to do with as you please and when you please.
– It is a forced saving. You are obliged to pay the monthly instalment and it goes towards your property. It is a long-term investment and allows you to build an equity ownership interest in your house.
– You will probably get a better home. The good properties will sell quickly if priced right. You are likely to rent properties that are more dated and not as well maintained. The landlord will not necessarily invest in top-end finishes to the taste of the tenant. It is hard to find well-maintained homes in rental stock. When buying, you can update to your taste and make it “a home”.
– There’s more variety to choose from. Rental properties are limited in some areas.
– A sense of belonging and community. When you live in the same neighbourhood for a long time, you get to know the people, form friendships and participate in community activities. As your family grows and your children go to school, this community might become more important as it is likely children from your neighbourhood will go to the same schools.
– Stability and security. If you do not overcommit and buy sensibly (and your financial position does not change), you have certainty about a roof over your head. With rentals, the landlord can decide to sell at any time and you will have to move. This can be a costly and disruptive exercise.
– Privacy. You do not have to worry about the landlord checking up on you or sending the rental agent for frequent inspections. You also might not have to worry about the “person next door” phoning the landlord if you play loud music once in a blue moon.
– You have a say. If you are an owner in a complex, boomed area or estate scheme, you will be able to attend the annual general meetings that determine the rules of conduct and you will have a vote to influence these. You can also table concerns (security is a good example) and do something about these matters.
– Live rent-free. If you pay a little extra on your bond (you can even treat it like a lease and escalate your payment), you can pay off your bond sooner and will then live “rent-free”. This will allow you to get to a point where you have a lot more cash in your pocket.
– Owning property as an investment and renting it out is a good source of passive income to supplement your retirement savings.
– The interest and fees of the property you rent out are deductible against the rental income you receive, so it could be tax efficient
– Owning a house as an investment will help you to build wealth over the long term to supplement retirement planning because the property is probably almost guaranteed to increase by at least the rate of inflation over the long term.
– Property as part of a diversified investment portfolio makes a lot of sense.