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Buying an investment property vs Going into a property investment

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Buying an investment property vs Going into a property investment

We all love the sound of owning property, don’t we? The prospects of owning one or even many properties sounds like your heading in the right direction towards you financial goals and reaching the infamous W word… Wealth. In order to best understand property, it is vital that we understand the role property plays in your holistic portfolio.

There is a variety of investment vehicles that can get you to achieve your financial goals. The question becomes apparent whether property is a good investment to place in your investment portfolio. Well there are a lot of reasons and some will be listed below.

 

  1. Long term Gains

Most investment portfolio’s comprise of the 4 pillars of asset classes. Property plays a huge role in the overall investment portfolio. Property is seen as a long term investment that yields great investment returns. If you keep the property for an appropriate amount of time and your maintain and improve the property, the chances are the property will definitely increase in value.

  1. Income generation

Whilst you awaiting the valuation increase on your property, this doesn’t mean your property will remain dormant. If you are not living in the actual property, you can actually gain income from it through rental income. This income can be used to pay off the mortgage bond on the property or allow you to re-invest into other properties or widening you investment portfolio by investing in other assets classes that will assist you in yielding a great return.  

  1. Collateral

Whether you are in business or working and trying to increase your wealth gradually, collateral will always be to your benefit. When used appropriately collateral can assist in borrowing money that can expand your wealth and place you in the next chapter of your wealth journey. That being said this is a strategy that needs to be used cautiously and with the assistance of a wealth professional.

  1. Broadened property investment opportunities

Property ,as an investment opportunity, has grown monumentally and has become very inclusive. If you don’t have the capital or credit score to acquire immovable property, you can actually buy investment funds that allow you to invest in property without the burden of owning one. This is inclusive of Real Estate Investment Trust (REITS) and Property funds/ Property Unit trust. You can invest what you can afford into the property and still benefit from the returns and income of property ownership.

 

This sounds like great reasons why you should go into property. But that being said it’s important to understand the cons of investing into property. One of the sore points is the lack of liquidity in property. If you opt to buy a physical property instead of REIT or Property fund in Unit trusts, you need to understand that there may be a few constraints. Property is an immovable asset. For you to gain the returns on your property you need to sell it at the right price, and this requires patience. You need to get the right buyer that will match your price when purchasing your property. The Value thereof will be dependant of the neighbourhood, improvements on the property, the amenities around the property and the overall quality of life around the property that you have bought (and now looking to sell). Thus it is extremely important to do a thorough valuation of the property especially if the intent of the property is for investment purposes and not residence.  

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Thandekile MolokoHead Wealth Manager

Thandekile Moloko is a Wealth Coach and Wealth Manager by profession. Her love for people and changing people’s lives lead her into the financial planning. She encompasses tenacity for finance, especially wealth management and personal financial management. With insurmountable experience gained in the industry, she has blazed the market with her expertise within the financial planning industry. With the intent of reaching a larger audience. In her wealth management career, she has changed many people’s lives and she changed the landscape of wealth management to be inclusive of those that need it the most. She is an avid believer in changing lives one financial situation at a time.

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