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A Fin24 user wants to know what options she has after she’s paid off her homeloan. She writes:
I have paid off my bond on a three bedroom house, but we have three kids and need more space.
I am not sure whether to extend my current house or to buy a new and bigger one. If I buy a new one, should I sell or rent this one?
Please advise.
Lanice Steward, managing director of Knight Frank Anne Porter, responds:
Once a bond is fully paid, the question often arises whether to buy a bigger, better home or renovate the present one to suit your needs.
There are always hidden costs to moving house that subtract from your capital investment.
The transfer duty on the new home, agent’s commission on the one sold, the move itself, transfers of phone and internet connection lines, new curtains and other incidentals are all “sunk” costs – they do not add value to your assets.
Unless you are able to add a substantial amount of capital or qualify for a bigger bond, you might be better off renovating your present home instead of buying a new one.
This is assuming you have the space available to build an extension on the plot of your existing home.
When renovating a home, one must be careful not to overcapitalise in certain areas. When the time comes to sell that home, you might not get the same value for your property.
Check the values of the current property, how much it will cost to add on to the home and compare these to similar homes in the area (ones that have been renovated or have a similar number of rooms and features).
If you can keep your present home to rent it out, and still afford to purchase another home that will meet your needs while obtaining the necessary finance, it is an excellent way to grow your property portfolio.
It might be advisable in this case to take a bond on the existing property to enjoy the tax benefits there. That bond interest could be offset against the rental income you will earn, reducing the tax paid.
However, just to make sure that this is the right thing for you, you should speak to a tax consultant to be aware of all the tax deductions and implications.
If you have decided to rent your property out, be sure to employ a reputable rental agent to manage the property and vet the tenants moving in there.
The agent must ensure that the allowed number of occupants, deposit payment date and rental payment date is adhered to so that renting the property does not become a burden later.
A reputable agent will screen the tenants properly and find the right person to move into the home.
*Article courtesy Property24, SA's leading property portal offering houses for sale, and property to rent in South Africa.
Do you have a pressing financial question? Post it on our Money Clinic section and we will get an expert to answer your query.
Disclaimer: Fin24 cannot be held liable for any investment decisions made based on the advice given by independent financial service providers.
Under the ECT Act and to the fullest extent possible under the applicable law, Fin24 disclaims all responsibility or liability for any damages whatsoever resulting from the use of this site in any manner.
I have paid off my bond on a three bedroom house, but we have three kids and need more space.
I am not sure whether to extend my current house or to buy a new and bigger one. If I buy a new one, should I sell or rent this one?
Please advise.
Lanice Steward, managing director of Knight Frank Anne Porter, responds:
Once a bond is fully paid, the question often arises whether to buy a bigger, better home or renovate the present one to suit your needs.
There are always hidden costs to moving house that subtract from your capital investment.
The transfer duty on the new home, agent’s commission on the one sold, the move itself, transfers of phone and internet connection lines, new curtains and other incidentals are all “sunk” costs – they do not add value to your assets.
Unless you are able to add a substantial amount of capital or qualify for a bigger bond, you might be better off renovating your present home instead of buying a new one.
This is assuming you have the space available to build an extension on the plot of your existing home.
When renovating a home, one must be careful not to overcapitalise in certain areas. When the time comes to sell that home, you might not get the same value for your property.
Check the values of the current property, how much it will cost to add on to the home and compare these to similar homes in the area (ones that have been renovated or have a similar number of rooms and features).
If you can keep your present home to rent it out, and still afford to purchase another home that will meet your needs while obtaining the necessary finance, it is an excellent way to grow your property portfolio.
It might be advisable in this case to take a bond on the existing property to enjoy the tax benefits there. That bond interest could be offset against the rental income you will earn, reducing the tax paid.
However, just to make sure that this is the right thing for you, you should speak to a tax consultant to be aware of all the tax deductions and implications.
If you have decided to rent your property out, be sure to employ a reputable rental agent to manage the property and vet the tenants moving in there.
The agent must ensure that the allowed number of occupants, deposit payment date and rental payment date is adhered to so that renting the property does not become a burden later.
A reputable agent will screen the tenants properly and find the right person to move into the home.
*Article courtesy Property24, SA's leading property portal offering houses for sale, and property to rent in South Africa.
Do you have a pressing financial question? Post it on our Money Clinic section and we will get an expert to answer your query.
Disclaimer: Fin24 cannot be held liable for any investment decisions made based on the advice given by independent financial service providers.
Under the ECT Act and to the fullest extent possible under the applicable law, Fin24 disclaims all responsibility or liability for any damages whatsoever resulting from the use of this site in any manner.
