Without a doubt . . . say the word property and at least 90 percent of us are thinking about our home or the home we one day wish to own. And, that’s not surprising because it will, for the vast majority of us, be the single biggest investment we ever make.
You might ask . . . is it worth buying property or should I rather rent? In all honesty there are pros and cons for buying and renting a home so it important to weigh up how such a purchase will affect your lifestyle and your pocket. Take a look before making this big commitment:-
ADVANTAGES OF BUYING
- Long-term security benefits.
- Potential to grow your personal wealth – your home will appreciate over time.
- Freedom to use without restrictions imposed by an estate or landlord.
- The option to renovate, do alterations and make changes.
- A backstop should you wish to raise a second bond.
- No possibility of a lease not being renewed when it expires.
ADVANTAGES OF RENTING
- No long term financial commitment.
- Insurance and maintenance are not to your responsibility.
- Mobility of being able to move regularly to suite your pocket and your lifestyle.
- No need to save a deposit or pay legal fees.
- No risk of not making any profit through resale as a result of economic factors such as a recession, high interest rates or simply through a location becoming less desirable.
Once having decided to purchase a home it is important to take a close look at the various options you have to choose from:-
When you buy a sectional title property (called a ‘unit’ in the Sectional Title Act), you are buying a section or unit of a common property in which you become a part owner. The common property is shared with the other unit holders and owners enjoy the benefits of the exclusive use of the common property. Guidelines and standards for the sectional title property are laid down and adherence is monitored by a corporate body. Townhouses, flats, units and complexes and clusters homes are sold under sectional title.
A shared block property is owned and registered by a company and usually applies to small blocks of flats or apartments. Under this scheme shareholders do not take ownership of the section of the building they occupy they simply purchase shares in the company as a form of property ownership. This system gives shareholders the right to use certain areas of the building – the flat they live in, a garage, etc. A major drawback of this scheme is that should the company go insolvent the shareholders will be left with valueless shares in a bankrupt company
99 Year Lease
Where a property is built on 99-year leasehold land, the homeowner never owns the land outright. The property is secured by the purchaser for a long period of time – specifically a period of 99 years. The land remains the property of the lesser and will have to be bought afresh when the time period expires. Usually the government or a municipality is the land owner in this type of property deal.
When the property is freehold the purchaser has full ownership of the property which means that you own a piece of land and everything on it. The property has a ‘Title Deed’ document which identifies the location and size of the property as well as the particulars of the owner who takes full responsibility for it. You will be required to pay rates to the municipality based on the value of the land and buildings. Owners can rent or make alterations to their properties as they see fit as long as they remain within the constraints of their local municipality building regulations.
PURCHASING A SECOND HOME
Although our home will, for the vast majority of us, be our only property investment there is a small percentage that dabble in second properties. These buyers are usually a conservative middle income group who have a little extra cash to play with. They purchase a smaller dwelling e.g. a flat they can down scale to once the children fly the nest, a retirement village for their old age or even a holiday cottage which eventually the extended family makes use of.
INCOME-PRODUCING REAL ESTATE
Income-producing real estate put simply is property that is purchased with the sole intention of renting it out to tenants to generate an income. This type of investment encompasses properties such as single family homes, small apartment buildings or duplexes purchased by individual investors to those purchased by high net-worth institutions such as life insurance companies, pension funds and real estate investment trusts.
Finally there’s portfolio investing. In this context real estate is traditionally considered an additional or alternative investment class to shares, bonds and other securities. It is sometimes said that investing in ‘bricks and mortar’ offers more security than a sometimes a volatile share market. Certainly property is a much more tangible asset. There is a sense of pride in ownership when you can physically see the property your own. On the downside, shares and securities require no maintenance – you’ll never be required to spruce up the gardens of your shares.