Building wealth through property ownership

As an asset class, real estate is globally regarded as one of the most rewarding and best wealth builders.

Based on history, South African property, and those located in Cape Town in particular, have not only held their capital values, but have grown in value.

A key benefit of investing in property is that it is relatively accessible. You are able to finance the purchase by way of a mortgage loan which can be paid off over 20-odd years while you either enjoy living in the property yourself or rent it out and earn a rental income.

Real estate as an investment is generally low risk compared to other investments where you could run the risk of losing your capital. At the end of the period of the mortgage loan, you will have an asset of considerable value compared to what you would have paid for it at the outset.

You could also add further wealth by investing in a second property and building a portfolio of properties. Provided you are in good financial standing, you should be able to take out a mortgage loan for the secondary property.

To build maximum value in your property, you need to ensure your property is well-maintained and not overcapitalised. You should always keep up to date on property market trends in your area and current sales values to compare with your own property.

Bear in mind that there is a considerable difference between investing in buy-to-let vs buy-to-live property. When investing in a home that you are going to live in, your criteria will differ.

If you are investing in property with the objective of renting it out, you need to ensure that there is adequate demand for the particular property and area at the rental rate that you aim to achieve. Rental demand is usually highest for certain property types and usually is locations with good transport and amenities.

Property investments also require a hands-on approach. Unlike other asset classes which are passive investments, property is an active investment which requires management and maintenance in terms of time and budget.

It also takes longer to dispose of your property investment compared to other asset classes. It is therefore important that you ensure that you have a financial buffer in the event of financial difficulty.

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