Investors always tell you not to put all your eggs into one basket, but to spread your investments around, but property might be one exception, and it is one area where it is fine to put all your money into paying off your home, says Samuel Seeff, chairman of the Seeff Property Group.
READ: Buying: 3 practical tips for house hunters
Owning a home is not just about having a roof over your head. Seeff says it is an investment in your future, your stability, and your wealth creation. It provides a secure base for building a life, raising a family, and achieving long-term goals.
Why should you invest in property, at any time?
There is no right time to buy, it depends on your circumstances. If you are starting out with your first home, you can start small and grow from there. Interestingly, the lower price bands have achieved some of the best value growth over the last ten years.
Property builds long-term wealth. In most instances, property will appreciate in value over time, and you will end up with an asset of considerable value. It is, however, a long-term asset which means the longer you keep it, the more it grows in value.
It is also an asset which generally retains its inherent capital value provided you maintain the property. You can add further value by making improvements and upgrading the property which means ever Rand invested could further add to your wealth.
Property is a tangible asset that you can see and touch and which, unlike other asset classes, generally retains its inherent capital value. On top of that, it will continue to appreciate in value over time provided it is maintained.
It is a hedge against inflation. As inflation rises, so does the cost and value of property. The SA property market has largely remained stable during economic fluctuations with few examples of wholesale value or price collapses.
It is also an asset that can work for you. You can use it as security for credit to build up other assets. You could also earn a passive income through rental yields, and could rent it out in part, or the whole of the property to help you pay your bond or earn an income.
You can finance property as an asset by taking a mortgage loan to enable you to acquire the asset, and pay back the loan over a period of time. While you are repaying the loan, the property asset will continue growing in value.
How to ensure you make a good property investment?
Property is not entirely without risk. Economic fluctuations and interest rate hikes can affect your ability to retain the property. Always ensure you buy below your means and manage your finances and budget carefully.
Investigate the area, prices, property value growth and the property itself before you make a final decision. Do not overpay unless you really want the house, and are financially able to absorb the additional costs until the value catches up to what you paid.
Keep the property maintained. A derelict and neglected property is not going to hold its value or attract much buyer interest to get it sold. Look after the property and keep it maintained so that it can retain its value.
Always invest further into the property. Start by putting any extra money into your home loan to pay it off faster. Keep it maintained and upgraded. If you are investing for rental purposes, bear in mind there are risks such as vacancy rates or low rental growth.
READ: Buying property: Where to look for bargain entry-level homes in Johannesburg
Local Real Estate agents Lara Hamilton Potts and Keith Harrison suggests buyers work with an agent: (read full article here)
“In addition to only using an accountable and experienced Agent/Agency when purchasing a property always consider if you were to resell what are the pros and cons about the potential property. ie. be wary of steep driveways, lots of stairs, and other aspects that may hinder a potential sale further down the road.”
“If you are buying an apartment or sectional title property check the levies and special levies so there are no hidden surprises that will affect you and especially the pet policies," says Hamilton Potts.
Harrison says as this will be the largest purchase you are likely to make, ensure you work with an agent you trust and who listens to you and understands your requirements regarding price and size of property.
"Ensure that the agent will guide you through the purchasing process especially and discuss important aspects such as location, security, schools, access to amenities like hospitals and shopping malls and access to Highways and Airports amongst others," he suggests.
Understand the entire costs of purchasing a property:
"It is important that first time buyers understand the entire costs of purchasing a property particularly that there are bond costs and transfer duty costs which are over and above the actual purchase price," says Richard Anderson of Local Real Estate, Ballito.
“There are differences between purchasing land, an already built property and off plan purchases. The agent should establish the end goal for the buyer to assist with this decision.," he says.
Local Real Estate agent Jake Morgan, says: “Being pre-qualified as a buyer who can afford a certain priced property is a definite advantage. This is a free service so use a trusted originator, as it also saves time on the purchase".
“When buying a ready built home, request the house plans and make sure that they are up to date and approved with an occupational certificate as sometimes renovations have not been approved by the municipality which really complicates the process. This is a vital piece of information.
“If buying for investment purposes, such as a rental property ensure you are purchasing in a popular area and usually less is more, as there is demand for a 2 bed 2-bathroom apartment. Avoid higher priced purchases as this means the rental needs to be higher and it could be a struggle to rent out," says Morgan.
In the meantime Rory Anderson another Local Real Estate agent in Ballito says, many buyers are now leaning towards secure Estates and complexes wanting security and facilities but even within these Estates, location is critical for future growth and resale.
"The properties that see the best returns on investment are those that are not on fence lines, that enjoy lovely outlooks and are also not too far from the entrance gate(s). It is also important for purchasers to think ahead and choose properties that will appeal to a wider market such as a lovely single level property as these will also enjoy faster growth than their counterparts with stairs and no gardens".
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