After living in your home for a few years, you may be thinking of extending it or changing the layout.
On the other hand, would buying a new home be a better option?
Both options have advantages and disadvantages, and the one you choose will depend on your specific situation and requirements.
Buying
When weighing up the pros and cons, keep in mind that there are always hidden costs to moving house that subtract from your capital investment and don’t add value.
These include:
• Transfer duty and conveyancing fees on the new property.
• Agent’s commission on the property you are selling.
• The cost of moving all your possessions.
• Transferring internet connection lines.
• New curtains.
• Many other incidental expenses.
This means that unless you have a substantial amount of capital on hand or qualify for a bigger bond, you may be better off renovating your present home instead of buying a new one.
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Renovating
This could be a good option if you have the necessary space to extend your existing home.
Here you need to be careful not to overcapitalise.
When the time comes to sell, you might not be able to recoup the costs of renovating if your home outprices similar properties in the neighbourhood.
Check the value of your property, add the cost of extensions and compare the total to the prices of similar homes in the area.
Additional bond
If you qualify for additional finance, it may be an excellent option to keep your present home and use it for additional income.
This is a perfect way to start a property portfolio and create wealth – for yourself and future generations.
Taking a bond on your existing property should enable you to enjoy considerable tax benefits.
The interest paid on the bond can be offset against the rental income you will earn, reducing the amount of tax payable.
To be sure you are making the right decision, it’s advisable to consult a tax professional to be quite sure of all the tax implications.
Most importantly, consider your specific situation and requirements and make the right decision.
Article: www.privateproperty.co.za/Sarah-Jane Meyer
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