Ways to store up value in your home
Real estate company shares some tips to help homeowners find ways to store up value in their homes.
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The sharp increase in interest rates might have caused homeowners to view their real estate purchases purely as an expense rather than an investment. Viewing property in this way can be dangerous, as it limits the potential returns a homeowner could stand to make when they eventually decide to sell.
Regional Director and CEO of RE/MAX of Southern Africa, Adrian Goslett, said that it is important to view homeownership as both a long-term investment strategy as well as a place to call home.
“Everyone needs a place to live; this can either be in the form of an expense, as with renting a property, or it could take the form of an investment, as with purchasing a property,” said Goslett.
When you choose to purchase, Goslett suggested that you consider ways to store up value in the home.
Also read: To sell or not to sell?
“Because property is an appreciating asset, owning your home is also a form of wealth creation. Those who are smart about how they go about it could generate greater returns for themselves in the long term,” he noted.
To help homeowners find ways to store up value in their homes, RE/MAX of Southern Africa shared the below tips:
• Pay extra on your home loan
The first reason that this is a good idea is that it will save you on interest charges – the faster you can pay off the debt, the less interest will be payable. Even just paying an extra hundred Rand every month could take months off the loan term and could end up saving you tens (or even hundreds) of thousands of Rands. To find out how much potential savings the extra repayment could make, use an online calculator such as the one on BetterBond’s website.
Secondly, those with an access bond facility could view their home loan as a type of savings account. Once you have accumulated enough in the access bond, you could access that money again as a cheaper way to finance a new car (for example). A home loan tends to offer a significantly lower interest rate than a personal loan or vehicle finance. Financing big purchases through a home loan could work out to be more affordable as long as you pay it back within a few years and not over the full 20-year course of the home loan.
Also read: Home inspection checklist for a drama-free sale
• Renovate or build-on
Another way to store value in the home is to tackle projects that will increase the home’s resale value. The key here is to avoid over-capitalising on the renovation. Work out roughly what it will cost to complete the project and then speak to a real estate professional to find out how much value the renovation could add to the home. For example, if the renovation might add R100 000 to the home’s value, then you want to spend less than that to complete the renovation.
• Sit tight
Real estate is a long-term investment strategy. Even if you do nothing to the home, it will be worth significantly more in ten years from now. If you move every three to five years, you might be able to break even or walk away with a small profit after taking into consideration all the closing costs but, unless it was a property flip where major renovations were completed, homeowners do not stand to make too much money on the home when it is sold too soon.
“Property is a great investment opportunity for those who treat it as such. Homeowners who find ways to funnel some of their disposable income back into their homes will stand to make far greater returns than those who do not,” Goslett concluded.