Should you buy a property outright if you can?
Category RealADVICE
"The vast majority of South Africans don't have enough capital to purchase property outright, but is it worthwhile for those who can? While this may seem like the ideal situation to be in, it's important to consider the implications before making a decision as big as this," says Gerhard Kotzé, CEO of the RealNet property group.
"First and foremost, there are plenty of benefits that come with purchasing property with cash. Buying a home outright means it's completely yours from the moment the transaction is completed, and the money has left your account. This means you'll be free from the stress of monthly bond repayments and the possibility of repossession if you fall on hard times."
"The other major advantage of purchasing property with cash is that it saves you money, as you'll avoid all of the extra interest you would pay on top of the property's actual value."
"Finally, sellers often prefer buyers who operate with cash, as it can act as a powerful negotiating tool. It typically leads to a quicker sale, and sellers usually don't pass on that opportunity. This can be a game-changer if you're after a desirable property in a competitive market."
"However, despite the numerous advantages that buying with cash offers, there are still some potential downsides to consider before making your decision."
"Pouring that much capital into a property can seriously limit your financial flexibility, which can be a major problem if you are hit with unexpected expenses or if another lucrative investment opportunity arises."
"Selling a property is often not a quick endeavour, and having so much of your capital locked into a property can present challenges. Another factor to consider is that while property is historically one of the most stable investments you can make, other investments may offer significantly better returns."
"Buying a home with cash is a significant step and a massive financial commitment, so before making any decisions, you need to ask yourself a few questions, such as: 'Will I have enough cash for emergencies if I make this purchase?' or 'Could my money serve me better in another investment?'"
"There is no right answer to whether you should buy a property with cash or opt for a bond. The best choice will depend on your needs, the amount of capital you're working with, and how comfortable you are with tying a significant portion of your wealth into a property."
Author: RealNet
