Investment Property For Sale
When it comes to investing your money, there are many options available including getting involved with property investments. Investment property for sale can be both a long term undertaking as well as short term. Short term property investment would refer to those who buy the more affordable real estate and then renovate to building to sell it at a profit. However, it must be remembered that for good returns the investment needs to be on a long-term basis for a minimum of 5 years or more. Investment properties can be a good idea, because you can use them to make yourself a passive income and property tends to increase in value over time. The returns on your investment are calculated on the growth of property, which at present averages around 6% to 8%. It must also be remembered that your returns are not determined on buying in wealthy areas. It is more governed by buying in areas that are developing at a fast rate.
Cities in South Africa and the need for property has tremendously increased over the years increasing the need for both residential as well as commercial properties. The urban regions have grown, which has also increased the need for things like schools, shops and offices. Even though the country has been and still is experiencing financial and other difficulties, the property market remains an attractive prospect for those wanting to invest in property. South Africa, despite its political uncertainty, is still a major draw card for foreign investors seeking to purchase property. The exchange rate at present is what attracts the overseas property buyers especially from the UK, USA and Australia. The places that seem to be more attractive are those along the coast in Cape Town and the Garden Route.
Since these opportunities can initially cost quite a bit of cash, it is always a good idea to way the pros and cons. Here are a few advantages as well the disadvantages of investing in properties for sale.
Advantages of Investing in Property
- By intelligently investing in the property market, investors can yield very good returns on investments. Unlike other investments opportunities, which can be up one day and own the next, the property prices tend to grow steadily over time. Property investment is therefore more stable.
- If property was bought at the right time and price, even during bad economic times, property can still show a growth in investment. Providing capital gain.
- Market indicators can help to predict how the property market will respond, which can then help to determine the projected return on investments.
- Property can also be used as collateral. All the financial institutions are willing to loan to property investors.
- Property can generate a stable and regular income creating financial security.
- The rental income can easily cover the mortgage or loan costs.
- When inflation goes up, so does the rental income. The property value also increases.
- You can make property more valuable by improving it.
- You, as an investor, have more control over your investment. For example, you can decide who rents your property or who manages your property. You as a property owner, make the decisions.
- You can use the expenses involved with property investment as a tax write-off
Disadvantages of Investing in Property
- Investing properties for sale can be a great idea, but usually does require a large amount of money.
- The investment amount will belong to a single asset and if something does go wrong, then your entire investment amount can be at risk. There is a lack of diversification in the property market.
- Property investments can be time consuming. You must select the best tenants, deal with repairs, find a good property agent.
- There are many costs involved like property managing costs and repairs. Then there are occasions when rent money goes unpaid or money lost due to vacancies.
- Dealing with unpleasant tenants can become very stressful.
- Property can be difficult to sell and cannot be divided up, so there is no liquidity. Property cannot be sold immediately, so if you need capital, you will have to sell the entire property. Shares on the other hand, you can sell portions and get capital almost immediately.
- If you don’t do your homework, you can be investing into a disaster. Any investment property for sale should undergo thorough scrutiny to ensure any financial losses in the future. Of course, property will always have to be maintained and have a few problems, but major issues should be dealt with from the start. You don’t want any hidden problems to come out of the woodwork after you have committed yourself.
- You must pay tax on any profits made from a property investment. You will also pay capital gains tax when selling.
Types of Investment Properties
Buy-to-let property, the idea to buy property and then to let it, is one of the easiest methods of investing in property today. However, there are always risks involved but it is a solid investment and the benefits overshadow the risks involved. Many seeking to invest in property are not only looking at residential but also commercial and industrial properties. On average in most major cities around South Africa the rate for rental on commercial or industrial properties is around R40/m². A joint venture in this regard is a great idea as a few friends together could afford to purchase a commercial or industrial property for say around R5 million. You will need to consider your monthly rental income as opposed to the monthly expenditure. If you do your sums correctly then you could very easily have a return on your investment of around 25%. This figure proves that an investment in commercial or industrial property is a good one. It is also far better than any bank will give you on their investments, plus you can still count on capital growth on the property value.
Records reveal that a one bedroomed apartment in the northern suburbs of Johannesburg was sold for R740, 000. You will need a total of R1290, which is to be paid for monthly expenses such as levies and rates. The apartment can be rented out for around R7, 000 per month, which leaves you with an overall investment of 17.25%. This again proves that property investment can be a reliable and sound opportunity.
If you are interested in investing in real estate but you do not want to have the problems of bad tenants, maintenance or even theft. Then you need to consider investing in Listed Properties. This option means you don’t buy any physical property yourself, but only invest in a property fund. They, in turn, invest in real estate companies. The main advantage in this investment, is that you can have money invested in various assets like residential, commercial, industrial or even retail properties. You can also own stocks in shopping malls, townhouse complexes and office blocks. Some of the top property funds in South Africa today are “Absa Property Real Equity Fund”, “Stanlib Property Income Fund” and “Prudential Enhamced SA Property Tracker Fund to name only a few.
Tips for Investing in Property
Research and knowledge of the property market can only give you advantage. Know your stuff before jumping into something, especially if you are new to the arena. If you don’t know the ins and outs of property investments, it would be advantageous to seek out a professional financial advisor or consultant. This may cost a little extra but will save you going forward. The cost of not being informed and making mistakes will take a lot more from you.
One of the major factors to consider when looking at investment properties for sale, is the location. Depending on what type of property you want to invest in, location is always important. Those areas that are more for families will need to be close to things like schools, shops and main roads. Single entrepreneurs and the older members of society would look for convenience and security. Always do your research to decide what property type you wish to invest in. Considering buying property to sell later? Make sure you know all about future developments in the area, new roads that are going to be built. Anything that can affect the value of the property. The most viable area in South Africa is the Western Cape as the property market has increase by more than 10.35%.
When owning a property, it is always a good idea to be ahead of maintenance issues. Make sure everything is working properly instead of waiting for something to happen, which can only ensure you have a profitable outcome. If maintenance is left to the last minute always leads to increased costs. A property that looks good, has a good track record and is in a good location will always be very desirable.
Try to pay cash for your investments, it is better than taking out a loan. But if this is impossible then it is a good idea that you should be able to afford the loan payments even if you have renters that do not pay. Not having enough money to cover costs may cause the whole investment to be more of a burden than anything else. Make sure you plan for and know all the expenses involved.
If you are toying with the idea of buying residential, commercial or industrial property, it is difficult to choose. All these properties have different types of risks. But if you are a first-time buyer, then it will be advisable to try out residential properties for sale first.
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