WHY INVESTING IN PROPERTY

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The popular phrase 'Money makes the world go round' is indeed true.  We need money to fulfil most of our needs, and Maslow's hierarchy of human needs still applies.  Some might say that money is not everything, as it cannot buy you happiness, but most will agree that without money you cannot do much.  Money is not only needed to provide for our basic needs but when used wisely, can provide the means to obtaining a sustainable passive income for years ahead.

While growing up, we all have expectations and dreams of how our life will be, and we eagerly await adulthood so that we may be 'free'.  However, as we enter the work environment after school or college, we soon realise that with adult life comes adult responsibilities, such as providing for our own accommodation, transport and insurance.  These responsibilities require money and, as your income increases and your family expands, these responsibilities increase.

The more your disposable income increases your standard of living increases so you will need more money to support your particular lifestyle.

Most people work for about 40 years of their lives to provide for their family and to make provision for income after retirement.  Life expectancy has increased exponentially since the start of industrialisation and modernisation.  Today, populations with the lowest life expectancy surpass the highest life expectancy of populations of the 1800's.  Statistics show that life expectancy in some countries increased from 40 years around 1800 to 78 years in 2013.

The question we usually ask ourselves when planning our retirement is how much money we'll need to maintain the same lifestyle we are currently enjoying, for the 20 or 30 years after retirement.  It has become more and more difficult to answer this question, as we do not have a crystal ball to predict the future or to indicate at what age we will leave this planet.  Current economic cycles and forecasts make it impossible to calculate inflation rates over the next 20 years, or, in fact, even over the next 5 years.  It is common knowledge that saving for retirement is not the best option, as interest rates do not keep up with inflation rates.  The significance about this is that the return-on-time ratio is actually poor.  If you invest money in a fund or project and receive a great return within a short time, you are delighted.  However, if you invest money in a fund or project and receive a dismal return over a long period, you will be very disappointed.  Most people commit 30 to 40 years of their lives to work and make monthly contributions to a pension fund, only to discover at retirement that they are receiving a pension that leaves them financially insecure.

The alternative is to rather invest some of your money during your 30 to 40-year career in buy-to-let property.  For a relatively small investment as a deposit and fees on an investment property banks will grant you a mortgage loan and you will receive a rental income which you use to pay back the mortgage loan and monthly costs of the property.  If managed well, you will soon have an asset generating and providing you with an inflation linked income for years to come.  This will also put you in a position to buy a second, third or even multiple properties.

The benefit of this type of investment is that you have full control over your investment and are able to decide how soon you want to build a substantial property portfolio.

Over the years, property investment went through many ups and downs in unison with economic cycles.  But one thing has stood out: if you buy buy-to-let property, your tenants of 'customers' pay for your investment, which is inflation linked.  As long as people have the basic need for a roof over their heads, you will have a sustainable income for as long as the property is in your possession.

If this topic appeals to you get yourself a copy of my latest book "How to make money through Buy-to-Let" by François Janse van Rensburg.

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