Is buy-to-let a good investment ?

If you are looking for excellent returns on an investment, property is hard to beat. With real estate, if you put down a deposit of R100 000 on a R1-million property, there is likely to be growth of R100 000 to R200 000 within a year, so the value of your investment will grow by R100 000 to R200 000. Unlike the stock market, the value of property rarely goes down, only the rate of growth slows in bad times making property a relatively low risk investment.

ABSA says that the residential property market in South Africa is still regarded as viable and sustainable for investors. Factors that will support the property market as an investment over the next few years include:

  • Strong demand from especially the emerging black middle segment, while a massive over-supply is not expected.
  • Continuing foreign demand for local property. Despite the fluctuations in the value of the rand, South Africas property prices are still low compared to other countries.
  • The improved investment status of property (higher return, lower risk and volatility) as an asset class compared with other investments such as the equity market.

Nedbank has an interesting section on their website (click on Borrow, then on Home Loans, then select Buy To Let) with information on the buy-to-let market.

No discussion about buy-to-let is complete without mentioning that it is not a get-rich-quick option. Buy-to-let, like other investments, should be considered a long-term investment that will require an investor to empower him-/herself with knowledge and to continuously stay abreast of the latest trends and developments.

Property is also an illiquid investment – in other words, it takes time to sell property and you cannot cash in a property investment overnight.

But if you are investing in a buy-to-let property with a long-term view and have done your research properly before buying, you can look forward to a solid, sustainable investment that may not produce spectacular overnight gains, but will produce steady, and often unbeatable growth, over the long-term.

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