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26 July 2021

To Rent or Buy?

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To Rent or Buy?

Dear Summercon Family

TO RENT OR BUY? THAT IS THE QUESTION!

There are those who believe that in South Africa today it is more advantageous to be a tenant rather than an owner. These advantages can include flexibility and, possibly, a cheaper occupation cost than might be the case if one were the owner.

For instance, a tenant pays rent, water, and electricity, and is relieved of the costs relating to levies and rates. The disadvantages of renting, however, are often over looked. These disadvantages include, in particular, the lost opportunity to accumulate capital in an asset over a period of time. Although the actual cost of this accumulation may, in comparison to a pure rental, come at a price, that price is well worth it in due course.

ACCUMULATION OF CAPITAL IS ESSENTIAL

The accumulation of capital by any young person is extremely important; those who do not accumulate capital during their 20’s and 30’s will almost always come to regret their lack of financial planning in their 40’s.

The ownership of real estate provides a mechanism of forced savings (the repayment of the bond) which will not be undertaken by a renter of properties.

In addition, the ownership of property, one’s own home, brings with it a completely different sense of achievement for the person in ownership.

A renter of properties is always living in someone else’s apartment. The sense of fulfilment, of coming home, can never be comparable to that of the owner.

Ownership always leads to greater care being taken of the property and the addition of various improvements which increase value.

IN CONCLUSION…

Do not underestimate the benefit of long-term savings (which is precisely what paying off a bond is)! The accumulation of capital becomes the sizeable deposit for your next home as you move up the ladder of property ownership.

Keep well, warm, and, as always,

Kind regards,

Peter Blanckenberg
Summercon Director

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