Despite the economic climate, both in South Africa and globally, purchasing property remains a sound investment, provided you’re in it for the long run.

The Harvard University Joint Center for Housing Studies examined homeownership as an effective means of building wealth. They found that homeowners still grow wealth faster than renters. They also emphasised the built-in savings element: you’re essentially being forced to save and automated saving works. The alternative could be to rely on your own fiscal discipline. Not always easy.

Some of the things you need to think about when deciding to live in the property you’re purchasing, or rent it out, include the following:

Buy to live: You have a roof over your head and your bond payments effectively go into your own pocket.
Buy to rent: The property could pay for itself. Rental income could cover bond payments or costs such as levies, rates and taxes, insurance, etc.

Buy to live: You are your own landlord.
Buy to rent: You have to maintain good relations with your tenant and deal with contracts, complaints, maintenance, emergency repairs, etc. You could get an agent to handle it, but their fees will eat into your rental income.

Buy to live: Unless you’re one of the privileged few who can pay cash for a property, your monthly bond repayments will not be the only regular expense. At the outset you’ll pay transfer costs, VAT, etc. On a monthly basis, there will be levies, rates and taxes, insurance, maintenance, etc.
Buy to rent: Rental income could cover many of these costs.

Buy to live: Bond repayments fluctuate in line with interest rates.
Buy to rent: Rental income is fixed, usually for six or 12 months.

Buy to live: You have the option of paying more than the basic monthly instalment into your bond to bring down the term of the loan and save many thousands on interest.
Buy to rent: Rental income is fixed, usually for six or 12 months.

Buy to live: You can live in the property for as long as you like.
Buy to rent: You’ll need to find new tenants from time to time.

Buy to live: It doesn’t apply to emergency repairs, but apart from that, it’s up to you when you do maintenance, improvements or repairs.
Buy to rent: As a general rule you’ll probably have to attend to requests for maintenance, improvements or repairs immediately.

Buy to live: You don’t have to concern yourself with supply and demand in the rental property market.
Buy to rent: Your rental income is directly related to supply and demand.

SOURCES: FORBES, OOBA