Should you invest in property now?

Until the crash of 2008, South Africans have seen some of the highest growth rates in property prices in the world over the past decade. With real growth in prices being seen again, is now the time to try and make a killing in the property market?

The first important lesson: don't be misled by people who say they bought an investment property for R1m ten years ago, and just sold it for R10m. When evaluating the profits on a property investment, there are numerous costs to take into account, including transfer costs, interest paid on the bond, insurance, commissions, and maintenance and repairs over the years. And remember how much time it takes to buy, maintain and sell property!

You will also need to be very patient. The market has changed significantly in the last two years, and making a quick buck by speculating in the market and flipping houses is no longer an option. You have to be committed for a longer period. If you need to rent out the property, you also need to be willing to manage tenants.

Property investment offers numerous advantages. Typically, it is a less risky investment than shares, with inflation-beating returns over the long term practically guaranteed.

Also, buying property offers an opportunity for the average Joe to use leverage to increase returns. For example, with a R50 000 deposit, you can buy and control a property of R500 000, unlike with a stock investment, where you need to pay the full price upon purchase.

An investment property (a property you receive rental income for, not your personal home or flat) also offers tax breaks - eg, interest, taxes and insurance are tax-deductible against the rental income.

Property offers a great way to diversify your investments - but do your homework about the area you are investing in, and make sure you are ready for the time commitment!

*Article supplied by Private Property.

Article from: www.realestateweb.co.za