because, whether you buy or rent, you still have to
spend money on a place to live.
So, that’s money that leaves your pocket every
month, regardless. It’s not discretionary. You have
no choice about spending it. So, why not get some
real value for spending it?
“The one significant advantage of
buying a house, however, is that it’s
a passive way of creating equity - or
a financial stake - for yourself. It’s
called passive because, whether you
buy or rent, you still have to spend
money on a place to live. “
In addition, it is money which you already know you
can afford – because part of the reason you work is to
put a roof over your head.
By contrast, investing in shares, for instance, uses
money that is additional to your monthly expenses. It’s
a more pro-active investment because you have to do
more than pay for the roof over your head to afford it.
Also, when you’re paying off your own home,
you get the benefit of both living in and using your
asset. You don’t get the same benefit from any other
investment. You can’t live in your shares.
Like all true investments, buying a home is not a
short-term investment. In fact, usually, if you sell
in anything less than seven years, the price of the
property won’t have increased in any significant way
versus the monies you still owe.
Also, the legal costs involved in selling and buying
again are likely to negate any profit you may make on
the property and will certainly impact on your ability to
afford your next home.
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There are rare periods when property prices
escalate rapidly and you can make a substantial
profit by selling. It’s worth remembering, though,
that the next house you buy will also have gone up
in price!
However, it is impor ta nt to get on to t he
proper t y ladder. Once you’re on that ladder,
buying another house becomes easier because you
have the value of your previous house with which
to trade. Without that value behind your name,
it’s much more difficult.
Also, owning a home and paying it off properly
gives you standing in the world of f inance. For
instance, banks are much more willing to grant you
loans for other purposes if you can offer them the
security of your property.
In other words, buying a house gives you access
to other finance and other opportunities by means
of which you can build wealth. And, holding
on to your house for 10 or more assures you of a
significant return on your original investment and,
because you’ve paid your bond for all those years,
gives you a very good credit record.
HOW TO PROTECT YOUR POCKET
In case of any unexpected surprises financially
speaking, it makes a good deal of sense to
create a buffer for your pocket. Rather give
yourself a space to which take on these sometimes nasty surprises.
For example: If your bond is R5 000 a month,
rather try increase the amount to R6 000 in
your budget so that you don’t fall short each
month, or have the bond eat in to any of your
savings and impact an 䁽ѡ