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The pros and cons of investing in property

by , 22 July 2013

Property is an attractive investment to many of us because we all know something about it. We all live on a property of some kind and so have some experience of it. But if you're seriously considering investing in property, here are some vital aspects you need to think about…

As with all investments, there are pros and cons to investing in property. Read on to discover what these are…

Advantages of property as an investment

The need for shelter – for somewhere to live and work – is an absolute.

So there will always be a demand for the right type of property in the right location, explains Francois Joubert in Become a Master Property Investor in 90 Days

Demand
Nowadays we expect to move several times during our adult lives, as our financial and personal circumstances change, so our home meets both our needs and reflects our status.

The property market, therefore, serves a constant requirement for change, enabling geographic movement and up or downsizing.

Finance
Mortgages are easier to get than many other types of loan, as lenders are very happy to secure loans on property because it’s proved such a sound investment.

You can, therefore, enjoy an increased potential for capital appreciation.

You can also borrow, not only to initially purchase a property or to improve it, but also to raise funds for other purposes.

Tax
There’s a major tax advantage to owning your property.

If you sell your SA home – your principal private residence – the sale is exempt from capital gains tax (CGT) unless your primary residence exceeds R2 million.

However, you can offset mortgage interest on investment properties (properties let out to tenants) against income for tax purposes.

Disadvantages of property as an investment

Unlike shares, property isn’t an immediately disposable asset. With investment properties, the following problems can present themselves…

Voids
There will be voids – periods when an investment property is empty – either while you find a tenant or while work’s being done.

You won’t receive any income from the property, but you’ll still have outgoing payments on it in the form of any mortgage repayments, insurance, ground rent, maintenance charges, etc., for which you may be liable.

Management
Property needs more ‘looking after’ than stocks and shares, so we advise you to employ professionals to manage it for you. A substantial investment deserves professional care and attention.

Bad tenant
You could get a rogue tenant who either damages your property, doesn’t pay the rent, or won’t move out when he or she should.

Providing the tenancy was properly set up in the first place, you’ll eventually be able to evict them. But the legal process can seem interminable and it may prove very difficult or even impossible to recover money owed to you.

There you have it, the pros and cons of investing in property.



The pros and cons of investing in property
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