Rent rather than buy

Don’t rush into buying before you have your short term debts paid off and a deposit saved up.

In the current property/ rental market it is possible to rent for less than it would cost to pay off a bond on the same property. This means that renting a property and investing the difference between the rent and the bond repayments on the same property could result in you making more money. This money could then be used to put down a deposit on a house.

Alternatively it could be used to settle up outstanding debt on other smaller accounts.

Now may be a good time to rent rather than buy, and this applies to all segments of the market. But this investment strategy seems to work best at the top end of the market, where the difference between the rental and the mortgage bond repayments is greatest.

The decision to buy a home is not purely financial; it is also very much a “lifestyle” decision.

Eliminating major debt, such as a home loan, as soon as possible should always be your priority. But it becomes an impossible goal for people who are financially stretched like most South Africans.

Many people fall into the trap of buying to the limit and living beyond their means, so they can never pay more than the minimum mortgage bond repayments. When you invest in property, you should always buy what you can comfortably afford.

Tenants have negotiating power and they can always move out and find cheaper accommodation, whereas a landlord is beholden to the bank, and a tenant paying rental that doesn’t cover the bond is better than no tenant at all.

Good landlords are also willing to negotiate rentals in order to keep good tenants.

For the full article head over to www.bondbusters.co.za