To buy or not to buy… that is the question.

“Real estate investing, even on a very small scale, remains a tried and true means of building an individual’s cash flow and wealth.” – Robert Kiyosaki

Real estate investment has been around for thousands of years and is an asset class that has consistently proven itself over time. It is easy to understand the attraction of a buy-to-let property investment, which is considered a sound investment with the profit potential to assist in the progression towards financial security.

In the long term, a property will appreciate providing profit from capital growth whilst providing a passive income generated by rent in the short term.

But every asset class has its pros and cons, and when it comes to asset classes, property is only one of many to consider. It is important to view any kind of property investment as a medium- to long-term investment. And as with any investment, it is advisable to have a financial plan in place, weigh it up carefully against other investment options, and factor in all of the potential costs and risks.

According to Regional Director and CEO of RE/MAX of Southern Africa, Adrian Goslett, purchasing investment properties now is a calculated risk that real estate investors will need to decide upon for themselves.

Expenses to consider include property insurance, maintenance, rates and taxes, utilities, possible legal costs or collection costs, rental agent commission and tax on rental income. Another consideration is the possibility of having to forfeit the rental income at short notice if the property is not tenanted. When it comes to selling an investment property, there will be capital gains tax.

A Property 24 article published on 5 December 2020 examines emerging property trends for 2021 as per the insights of industry experts who refer to the impact of COVID-19 and the resultant low-interest rates that currently drive the market.

First-time homebuyers should note: “The historically low-interest-rate environment has subsequently created the opportunity for many South Africans to enter the property market for the first time, as it becomes cheaper to buy than rent.”

Also that: “The rental market is seeing a high level of vacancies right now as the financial impact of the Covid-19 on the average South African takes its toll – giving the tenant considerable power of choice.” 

For property investors, this is obviously not all bad, as purchasing an investment property now means that investors will also benefit from these low interest rates. Another positive is the fact that it is currently a buyer’s market too.  

With reference again to the above article, advice from TPN Managing Director, Michelle Dickens, that may be reassuring to property investors is that: 

“Rental properties that are priced right and offer a sense of security were the two top priority across all rental price bands. Providing an environment which is safe and secure at no additional cost, to a very price-sensitive tenant is the best thing a landlord can do right now.”

If you would like to look further into property investment, or have any other investment or financial planning needs, let us at WellsFaber share our wealth of knowledge and explore your options with you.