Is your home a true asset?

Many South Africans aspire to homeownership because they want to have a piece of land that they can call their own, an asset that they know will appreciate in value and provide them with a foundation for financial security. Adrian Goslett, CEO of RE/MAX of Southern Africa, says that while a owning a property is considered to be an asset – is every home a true asset?
“If you read the dictionary definition of the word ‘asset’, it would describe it is any item of economic value owned by an individual or corporation, especially that which could be converted to cash. Well, that may be the definition of the word, but what is a true asset? Is it something that sits on the bottom line of your balance sheet or is it something more?” asks Goslett. “The real determining factor of what makes a true asset is something that generates an income in excess of the expenses it takes to retain it. While real estate investment can be that asset, just remember to make your money when you buy it and not when you sell it.”
Goslett advises that when it comes to property investment, the golden rule is to always purchase a property that represents good value. “Although this means that the process of buying a property may take a lot more time and research, there are still excellent opportunities available to property buyers with access to finance. Buying a property that offers good value for money will mean that buyers are already ahead of the curve and won’t have to wait for the next boom to see any real capital appreciation in the property’s value,” says Goslett.
According to Goslett, in order to determine whether a property is a true asset, the buyer will first need to work out whether the costs of maintaining the property and paying the monthly expenses are less than the income generated by the said property. The operational income, which is the rental amount minus tax, should outweigh the total monthly cost of owning the property. The profit generated from this true asset, if managed correctly, can then be used to save up or purchase the next true asset. He notes that this is of course referring to a property that is bought as an investment and not as a primary residence.
“Although a primary residence will not generate an income and does have a number of maintenance costs and running expenses, it can also be a good asset that benefits from capital appreciation in the future. Even if a property doesn’t appreciate in value over the short to medium term, it will definitely outstrip most other investment vehicles over the long term and provide a solid foundation for wealth creation. However, the same principle would apply of purchasing a home that is available at a fair market-related value. There is also the vital aspect of purchasing within a good location that is close to amenities and good schools,” says Goslett.
He concludes by saying that purchasing the right property can provide the owner with more than just an asset, but more importantly a true asset that outperforms other financial vehicles and provides a solid return on investment.

  Comment on this Article

  Please login to post comments

Post to my facebook wall
Characters remaining

    Latest Property News
    • 24 Apr 2018
      The thing about the property ladder is that at some point in our lives we all have reason to want to climb a rung or two higher. Sometimes, it’s because we’ve outgrown our previous dream home, or because we want to be in a better neighbourhood that’s closer to work or to schools. Sometimes it’s because our circumstances have changed, and we’re taking care of elderly parents or relatives. Sometimes, it’s just because we want a property that reflects the financial status our hard work has won.
    • 20 Apr 2018
      Whenever changes in the political ecosystem of a traditional property market create uncertainty, smart investors begin to look elsewhere for new opportunities. Property experts at IP Global have analysed the trends and crunched the numbers to find new markets to explore in Europe and the United States.
    • 20 Apr 2018
      Energy and water self-sufficiency are increasingly important factors in home buyers’ choice of property – especially in Cape Town where the extreme drought of the past few years has made municipal supply costly as well as uncertain.
    • 19 Apr 2018
      During the last decade, rampant development has progressively transformed Cape Town’s property landscape with densification being the order of the day, but there are still one or two hidden gems like Scarborough which have retained their original character, offering an inimitable lifestyle and an attractive investment opportunity.
    • 19 Apr 2018
      The rental market is a cut-throat sector of the real estate market that waits for nobody. According to Adrian Goslett, Regional Director and CEO of RE/MAX of Southern Africa, first-time renters need to be fully prepared before they even start the process of looking for a place to rent in order to avoid the disappointment of losing out on their ideal property.
    • 19 Apr 2018
      Choosing to buy your first home instead of continuing to rent is a big decision that will usually take some time to put into action, but the sooner you can save up a sizeable deposit, the closer you will be to reaching your goal.
    • 18 Apr 2018
      Selling your home is no small task and as you will quickly find out, there are a lot of misconceptions about the process. Gerhard van der Linde, Seeff's MD in Pretoria East lists the top 5 misconceptions when you are selling your home.
    • 18 Apr 2018
      The Cape Town municipality is now installing water-management devices at properties that have been non-compliant with the new level 5 water restrictions and there are talks of fines between R5,000 and R10,000 for households that use too much water.
    Subscribe to the MyProperty Newsletter

    Last Name  
    Email Address  
    Email Frequency
    Share this Page

    For Sale Property
    Rental Property
    More Options
    Connect with us