If you can take the leap, investing in property in your twenties or thirties is an ideal method of forced saving. It puts you in the position of not having the disposable income to spend on things that are probably not that important, which is not necessarily a bad thing, whilst simultaneously ensuring that you’re building capital.
An investment in property sooner rather than later, will set you in very good stead, especially once the compounded nature of an early investment kicks in. Even if it means buying a home that you yourself cannot afford to live in but can rent out, whilst you live with your parents or in a commune, the asset that you are building up on the side will pay dividends in the long-term.
The time effect on money means that with a property investment the sooner you commit and the quicker you can pay off your bond, the better the effective return earned will be. In other words, the moment you no longer owe the bank you can start enjoying the full potential of passive rental income.
While younger is better, it’s never too late to get onto the property ladder. Investing in property at any age, if done with knowledge and foresight, will generate good revenue. Talk to an estate agent and start looking at the market and what you may be able to purchase. Have a plan.
Property can provide investors with a steady rental income stream as well as capital appreciation. However, it is important to assess the market and the investment carefully. Do your homework, shop around and get advice.
Location and the future of the location is the first and foremost factor to consider when purchasing an investment property. Does it show potential growth or does it show a propensity for decay? What is happening within the immediate surroundings and in the suburb and area as a whole?
Take stock of fixtures and fittings. Are they durable enough to keep maintenance costs at a minimum? Will they look dated in five or ten years’ time?
What is the demand for the property? Are prospective tenants looking to move into the area because it’s close to schools or a business district?
Take a five year view and calculate your costs and your return, but also consider a longer period. A ten year view is preferable as this will generate a more valuable return on investment because it should give the best capital appreciation on a well-located and pristinely maintained property.
From a tax point of view, rental income forms part of income and you would pay tax accordingly. However, there are certain expenses that can be deducted on your tax return. These include:
2. Agency fees of Estate Agents
3. Homeowners Insurance ( not Household contents insurance)
4. Garden Service
6. Security and property levies
If you are ready to take the leap and if you are ready to start creating wealth, talk to your estate agent about a property investment that will work for you, your budget and your needs. Start looking at the market to have a more concrete idea of what your money will buy.
For investors wanting to purchase a bricks and mortar asset, buying a new townhouse in an up and coming area can provide the opportunity for generating passive income and enjoying the benefits of being a landlord in the long-term as well as the medium-term. For more information, go to www.oaktreevillage.co.za .