Property investment pros and cons

2012-07-17 14:46

Cape Town - Does it make sense to buy a second property, and is this a good option to grow your money?

Danelle van Heerde, head: advice processes and tools at Sanlam, weighs up the pros and cons for Fin24 users mulling property investments:

To determine the best investment option for you, you would need to consider your full financial situation.

This would include the retirement provisions you are making, any other investments you have and your access to funds in an emergency. 

Diversifying your investments into different asset types is important, as it can limit the impact of negative market movements.

However, there are some general considerations that you should take into account when evaluating property investments.

• A good property investment generally will provide a decent return in excess of inflation. Consider the location, attractiveness to prospective tenants and the level of rent you can earn.

• You can deduct the interest you pay on the bond from the rent you earn for tax purposes.

• Having an access bond provides you with an excellent vehicle for saving (but note that paying additional capital will impact the tax benefits if you are renting out the property).

• Property values are currently still low, and it is therefore still a buyer's market.


• You may not be able to sell the property easily to access your capital.

• Your income stream will be impacted if you do not have tenants or your tenants do not pay their rent, which may affect your ability to make bond repayments.

• Your income stream will be reduced by property taxes, maintenance expenses, etc. You need to take this into account when evaluating a potential property investment.

To determine whether buying another property is an appropriate investment in your specific circumstances, it would be best to get a registered financial adviser to do a full analysis of your financial situation.

 - Fin24

  • - 2012-07-18 10:23

    Never consult a financial adviser for property investments. They are weighted in advice on Cash, Bonds and Equities as they make ongoing fees in these asset classes unlike property where they make a once off fee only. Rather consult a property asset manager or property professional (auditors and the like). Furthermore, the leveraging only available to property (using other people's money) provides property with a distinct advantage over other asset classes in terms on long term yields. Property is a less liquid asset class as correctly stated in the article, however, if properly managed, you should always have liquidity available in a property portfolio. If you do not know how, let property professionals manage your portfolio.

  • piet.strydom - 2012-07-18 14:17

    The ONLY way to financial freedom is to train yourself in financial matters. It is not difficult, contrary to what the "experts" would let you believe.

  • pages:
  • 1