Wednesday, 17/4/2024 | 5:32
  
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Is property investing only for the wealthy?

Property ownership has always been associated with wealth. Property is a tangible asset that can be seen, providing a sense of security. It is also a great income generator for little effort, and there are some distinct tax advantages that make it very appealing. 

You don’t have to be flush with cash to be a property investor. While some wealthy people may pay cash for property, you can get your foot on the property ladder with far less money. You will need some cash to get started, but with financing and good tenants, growing your wealth is easily attainable, if done correctly.

Grow your knowledge

If you don’t understand how property investing works, you could lose money fast. This is either because you fear the unknown, so never get started, or because you make poor investment decisions. 
Before you even start considering a property investment, read, learn, and up-skill yourself so that you become an expert. When it comes to successful investments, having a mountain of knowledge is far more important than having a huge amount of money.

Use other people’s money (OTP) to buy

You can fund your investment using the bank’s money, so to buy a R1 million property, you may only need R150,000 for a deposit and costs. You may be lucky enough to obtain a 100% home loan, but in most cases, a deposit of 10% or even 20% may be required. The balance will be funded by a home loan. Of course, you need to be able to prove that you can service the debt, and this will exclude any potential rental income if it’s your first investment property. 

Use OTP to pay off your debt 

Once you have a tenant in place, aim to have your rental income pay the bond, rates, and any other expenses. It makes financial sense to have your rental income cover your expenses, and the form of leverage you have is your home loan. The larger your deposit, the smaller your home loan will be, resulting in lower monthly repayments. You can’t control the impact of interest rate fluctuations, but if you can put down a substantial deposit, you can ensure that your costs are covered.

Your rental income is taxable, but you can deduct the interest on your home loan as well as any other expenses such as rates, maintenance, insurance, and rental agent’s fees.

And then there are two

You can leverage the equity in your first property to purchase a second one; you would increase the home loan to pay for the deposit for property number two. Also, if you have a good record of rental income, use this as part of your income when applying for your next home loan.

Property isn’t just for the wealthy; it’s a sure way to get rich. If you’re savvy, have some cash, and make the right decisions, you can join the ranks of those who have built their wealth through property investment. It all starts with the first property.