Ensuring a sound property investment
Category Finance
Investors commonly advocate for diversification, advising against concentrating all investments in one asset. However, property ownership often stands out as an exception. It's generally acceptable to prioritize putting all resources into paying off your home.
Having a home goes beyond simply having a roof above you; it encompasses a sense of security, stability, and belonging. It serves as a stable foundation for constructing a life, nurturing a family, and realising enduring aspirations.
There isn't a definitive timing for purchasing a property; it varies based on individual circumstances. For those embarking on their first home journey, starting with a modest investment and gradually expanding is a viable strategy. Interestingly, lower-priced properties have exhibited noteworthy value appreciation over the past decade.
Property ownership is a pathway to long-term wealth accumulation. Typically, properties tend to appreciate in value over time, evolving into valuable assets. However, it's crucial to understand that property is a long-term investment-the longer you hold onto it, the more its value grows.
Moreover, property, when properly maintained, maintains its capital worth and can be enhanced further through upgrades and improvements, translating every investment into potential wealth augmentation.
Unlike some asset classes, property is tangible and resilient, generally holding onto its intrinsic value while continuing to appreciate over time, provided it is well cared for.
Furthermore, property serves as a hedge against inflation, as its value tends to rise along with inflationary pressures. The South African property market has historically shown stability amid economic fluctuations, with minimal instances of significant value or price declines.
Property can also be leveraged to work for you. It can be used as collateral to secure credit for acquiring other assets. Additionally, rental income can be generated by leasing out part or all of the property, aiding in mortgage payments or generating supplementary income.
By financing property through a mortgage loan, you can acquire the asset while repaying the loan over time. Meanwhile, the property's value continues to appreciate, potentially amplifying your wealth as you repay the loan.
Property investment carries inherent risks, particularly during economic downturns and periods of interest rate hikes, which can impact your ability to retain the property. It's essential to purchase within your financial means and meticulously manage your finances and budget.
Before finalizing a purchase, thoroughly research the area, property prices, historical value growth, and the condition of the property itself. Avoid overpaying unless the property aligns closely with your preferences and you have the financial capacity to absorb additional costs until its value catches up.
Maintaining the property is crucial. Neglecting upkeep can lead to a decline in value and diminish buyer interest. Regular maintenance helps preserve its value and attractiveness in the market.
Continuously invest in the property's upkeep and improvement. Consider allocating extra funds towards paying off your home loan faster and enhancing the property. For rental investments, be aware of potential risks such as vacancy rates and slow rental growth, and factor them into your investment strategy.
First-time buyers must grasp the full scope of purchasing costs associated with acquiring a property, including additional expenses such as bond costs and transfer duty, which go beyond the initial purchase price.
Properties yielding the highest returns on investment typically exhibit characteristics such as being situated away from fence lines, boasting picturesque views, and maintaining proximity to entrance gates. It's prudent for buyers to anticipate future market appeal by selecting properties with broad desirability, such as charming single-level homes, as these tend to appreciate more rapidly compared to properties featuring stairs and minimal outdoor space.
Author: Huizemark Sandton