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A Fin24 user wants to know which model is the best for property investing. He writes:
Which model is the best in terms of investing in property in the long run:
1. Buying the first property and paying it off to use as security before you move on to the second one; OR
2. Buying the first one and saving until you have enough to cover two property bonds, and then buying the second one and thus going on and on?
Mari van Wyk, Korbitec executive manager: customer relationships responds:
When it comes to property investment, there are many strategies to adopt depending on your personal situation and goals.
Investing in property is always valuable and offers long-term rewards, and therefore developing and growing your property portfolio needs to be done with careful consideration to ensure you get the most out of it.
The two scenarios you mentioned have their own advantages and drawbacks, and the decision about which strategy will be best for you will largely depend on affordability and the speed with which you would like to grow your portfolio.
Meyer de Waal, Oosthuizen & Co, explains that as a property investor you must always consider the worst-case scenario.
Ask yourself what would happen if you cannot afford to pay the bond on one of your properties: will this jeopardise your other properties?
"If you wait to pay your first property, taking the usual 20 years, it will take you a long time to build up a portfolio", says De Waal.
"However, if you manage to settle your bond before purchasing a second property, you would be able to raise money against the first property for use as a deposit on the second - this way you may be able to negotiate a better interest rate for the second property."
The property investment environment comes with many industry nuances and decisions to make, therefore De Waal encourages those wishing to build their property portfolio to make sure they are well informed.
It is advisable to discuss your plans with an accountant to identify what interest expenses might be tax deductible, should you rent properties out.
- Fin24
Do you have a pressing financial question? Post it on our Money Clinic section and we will get an expert to answer your query.
Which model is the best in terms of investing in property in the long run:
1. Buying the first property and paying it off to use as security before you move on to the second one; OR
2. Buying the first one and saving until you have enough to cover two property bonds, and then buying the second one and thus going on and on?
Mari van Wyk, Korbitec executive manager: customer relationships responds:
When it comes to property investment, there are many strategies to adopt depending on your personal situation and goals.
Investing in property is always valuable and offers long-term rewards, and therefore developing and growing your property portfolio needs to be done with careful consideration to ensure you get the most out of it.
The two scenarios you mentioned have their own advantages and drawbacks, and the decision about which strategy will be best for you will largely depend on affordability and the speed with which you would like to grow your portfolio.
Meyer de Waal, Oosthuizen & Co, explains that as a property investor you must always consider the worst-case scenario.
Ask yourself what would happen if you cannot afford to pay the bond on one of your properties: will this jeopardise your other properties?
"If you wait to pay your first property, taking the usual 20 years, it will take you a long time to build up a portfolio", says De Waal.
"However, if you manage to settle your bond before purchasing a second property, you would be able to raise money against the first property for use as a deposit on the second - this way you may be able to negotiate a better interest rate for the second property."
The property investment environment comes with many industry nuances and decisions to make, therefore De Waal encourages those wishing to build their property portfolio to make sure they are well informed.
It is advisable to discuss your plans with an accountant to identify what interest expenses might be tax deductible, should you rent properties out.
- Fin24
Do you have a pressing financial question? Post it on our Money Clinic section and we will get an expert to answer your query.
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