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Invest

The Risk of Investing in Property

By February 22, 2018 No Comments

“THE BIGGEST RISK IS TO TAKE NO RISK AT ALL”
~ Casey Neistat

 

The risk (or absence thereof) of investing in property.

I truly believe investing in property is one of the safest investments you can make. And I’ll tell you why:

  • Property is tangible – It is something you can feel, touch and see.
  • It is a basic human need – Everyone needs a roof over their head, which means an entry-level property will always be in demand.
  • The South African population and the population’s wealth is also growing, and from a supply side, land is limited, and they are not making any more of it. From a fundamental economic perspective, this means property prices will continue to increase.

The risk associated with property investment is another reason to invest. The basic measurement for risk in the investment world is standard deviation. It measures how much your return on investment deviates from the average return on investment.

Now, consider all the properties you or your relatives and friends have ever owned. Have you ever known one to plummet in value? It is a rare occasion as the standard deviation in property is extremely low because returns are very constant. Property prices do not deviate drastically from one year to another, and neither does rental income.

Tip: Even though property is a low-risk investment, it is important to have a reserve fund, especially when you finance and refinance properties. You need to have a certain percentage of the property value in cash in case something goes wrong.  

For example: You can start with 5% and then move towards 10% of the property value. In other words, if you have a R900k property, you want R45k in your access bond and move towards having R90k. But you do not have to save up for this. You can refinance your property and keep this amount separate in your bond (access / flexi ) after you’ve had the property for a year.

Remember, the best time to start investing in property is now, and you can book now for our property investment seminar. Take the risk or lose the chance!

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