Why Capital Growth is Important!
Property investment enables you to generate a passive income. This means that you can earn money you don’t have to work for.
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Investing in property is the best way to grow and maintain your wealth.
There are two strategies one can follow when investing in property. The first strategy is to focus on large capital growth and the second strategy is to focus on a high rental income. These are typically mutually exclusive, and a smart investor should consider both at various times of his/her property investing journey. Purchasing a property, which requires you to put in a few hundred rand each month to cover all the expenses related to the property, may put some strain on your cash flow, but you will be well rewarded in due course.
Let’s say you buy a property with a 100% bond to the value of R1 000 000 and we assume a 10% yearly increase in value, this would mean you are making a return of R100 000 per year just from the capital growth! When comparing this to a property which has a cash surplus of R1000 per month over a 12-month period, you would only have made a return of R12 000 in that same year.
Capital growth on property value can be as much as 10 times more than your gains from rental income. This capital growth will be created tax free until you decide to cash out and even then there are legal ways to roll over your investment and reduce or completely eliminate taxes due.
Five years down the line you will be sitting with R500 000 in equity (not even taking the compounding effect into consideration). You now have the opportunity to roll over your investment, and with a large deposit, you may break even on two high capital growth properties, compounding your growth in the years to come.
Focusing your property investments on capital gains could supercharge your investments and give you peace of mind when considering your financial future and your retirement. Ten years from starting your property investment journey, depending on your end goals, you could easily have at least four properties in areas of high capital growth breaking even and compounding your wealth at increasing speeds!
This strategy has the potential to radically change the wellbeing of your life and that of your family for generations to come. Choose Capital Growth to invest in your wealth and future.
With more than 20 years experience, allow PropInvest to assist you with creating a property investment strategy to become financially free.
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