One of the most important long-term goals for many South Africans is to save for a comfortable retirement. There are plenty of strategies to achieve this, some offering better returns than others. One of the biggest debates is the choice between investing in property or saving through a retirement annuity.
The Pros of Property Investment
Although property growth hasn’t been great in recent years, with the high-performing Western Cape market being the exception, it’s not all bad news for investors. Firstly, a flat housing market means it’s easier to buy up property at a bargain price. Secondly, the rental market is very strong as people choose to rent rather than apply to the banks for home loans.
Although there are expenses when it comes to property investment – from transfer costs to maintenance costs and taxes on rental income – the benefits are twofold. Not only do you benefit from the growth in the value of your property, you can also earn off the rental income itself. This is a great way to supplement your income, put money away for other investment ventures or even pay off the property itself.
In terms of retirement, a property investment portfolio can bring in enough income to provide for you through your golden years. If you start early and work towards paying off the loans for your property portfolio – especially if you add in the money you would have to set aside for your RA – you can be debt-free, earning rental income and own your own home by the time you retire.
How to Choose a Good Investment property in South Africa
If you decide to invest in property, here are some factors to consider when you start looking to help you find a quality investment:
- Location: Choose a property that is in a god growth area where there is high rental demand.
- Amenities: The area you buy into should have good access to major roads, be in a desirable area for schooling, close to shops and malls, and have good security.
- Budget: Know your budget before you start looking. Speak to banks about the loan you would qualify and consider your options for the 10% deposit you will have to raise. Take a look at rentals in the area to see how your payments vs. rental income and capital growth measure up. Also consider potential maintenance costs on the properties you are considering.
Jason Scholtz is the CEO at Envision Investments and a leader in the property and strategic investments industry in South Africa. For more investor tips and an insider’s look into the South African market, be sure to get in touch, keep an eye on this blog or visit http://www.envisioninvestments.co.za/