If 2017 is the year you have set aside for your first ever property purchase , then you may be experiencing some mixed feelings about the road ahead . Chances are , you are excited about new opportunities but feel anxious because of some of the uncertainties and questions you might still have .
How should this process begin ? Who can you turn to for advice ? What mistakes should you try avoid along the way ? And how can you be sure that you are making the right decision anyway ?
We understand your concerns . Buying a property is a big financial obligation ; if you commit to buying a house and paying off a bond or mortgage , you may want to avoid finding yourself facing several lean years ahead . This means you will want to know you are doing the right thing and that it will be worth it in the long run .
To address these concerns ‒ and others like it ‒ Real Estate Investor and My BondFitness have developed an 8-step education guide to help first-time property buyers navigate the path ahead . Our infographic on page thirteen illustrates the eight steps that will be covered in the series over the next few months .
The end goal This article is the first ‘ instalment ’ of the 8-step series . It will help you answer two questions that are relevant to this stage of your journey :
• Is it better to rent or buy ?
• If I do buy , should I buy to live or buy to let ?
1Is it better to rent or buy ? Many of today ’ s young adults still feel quite sceptical about investing in property after the 2009 global financial crisis . They witnessed a devastating property market crash that sent thousands of first-time homeowners spiralling into major and unserviceable debt ‒ almost overnight .
In the U . S ., especially , many young family units had to move back in with parents or relatives to split living costs and expenses as they could no longer afford to pay rent or service their mortgages . Numerous others had to take on multiple jobs just to make ends meet . This has made younger generations hesitant to dabble in the property market . They are wary of trusting their money and financial wellbeing with traditional financial service providers .
Recent history aside , there still exists the age-old debate of whether it is better to buy a property , or rent and pay off someone else ’ s bond instead . There are pros and cons for both sides of the debate , which I have summarised below .
Renting : The Pros
• No risk of owning a depreciating asset
• Low upfront costs
• No responsibility for maintenance or repairs
• Easy relocation
• Can work well as part of an investment strategy
Renting : The Cons
• No equity building
• No tax benefits , incentives or subsidies
• Costs include security deposits , non-refundable deposits , rent and utilities
• Little creative freedom to refurbish and renovate
• No control over annual rent increases
• Potential threat of eviction
Buying : The Pros
• Building equity over time
• Obligatory manner of saving
• Access to Government susbsidies for qualifying first time home buyers – such as Flisp
• Potential for rental income
• Tax benefits or incentives
• Full creative freedom to refurbish or renovate
• No threat of eviction
• Helps you build good credit
• Relative stable repayment structure under current interest rates
• Avoid annual rental escalation increases
Buying : The Cons
• Many and high upfront and recurring costs , including transaction costs , down payments , property rates and taxes , homeowner ’ s insurance , loan payments and utilities
• Possible fluctuating interest rate payments on home mortgages
• Potential for financial loss should home values decrease
• Responsibility for maintenance and repairs and their costs
One of the main arguments for buying over renting goes something like this :
Renting only makes sense if you can save the difference between what you pay on rent and what you
www . reimag . co . za FEBRUARY 2017 SA Real Estate Investor 11