Investing in property a good idea

In this advice column Barry O’Mahony from Veritas Wealth answers a question from a reader who needs advice on whether to invest in property.

Q: Please may I ask you to assist me with advice regarding a dilemma my husband and I have right now? He is 69 years old and has two more years of working, earning R50 000 per month. I am 54 and have my own small home-based business which takes care of personal expenses, luxuries and family holidays.

We own our primary residence, with no bond, worth around R3.3 million, and a holiday house at the coast worth R1 million. The only debt we have is about R120 000 we owe on a car. We have one son who still has two years of schooling to complete, and four years at university.

Our investments include R5.5 million held with an investment company, R800 000 in a retirement annuity, R450 000 in a pension product, and R1.3 million in the money market.

An opportunity has now come up to purchase a townhouse for R1.7 million. My husband doesn’t feel that it the right thing to take cash we currently have in the money market and invest it in a residential property. He feels that he would rather invest it with the current investment company.

I however feel that a second property would be a better investment, particularly as this could be rented out. The rent could cover a small bond until the property is paid off and we could then have the benefit of a second income when he retires in two years.  

We could also potentially take the early retirement value on the pension product and use this towards the bond on the property. 

What would you advise?


In looking at your situation, you are both doing relatively well from an earnings point of view, but the 15-year difference in age is a huge factor that makes planning much more difficult. You also started a family relatively late and as we all know, kids are incredibly expensive, especially in their teens and early 20s.

Given your family situation, it counts in your favour that your husband plans to work until age 71. We fully support people carrying on their working lives while this is still fulfilling, and the additional economic contribution it provides increases your chances of being financially independent in retirement. If it is possible for your husband to continue to earn some money for another few years beyond age 71, this again would be an enormous help.

Before going into the specifics of your situation, there are a few considerations to bear in mind when considering the investment case for physical property against an investment in a balanced portfolio:


  • Property can be leveraged, balanced unit trusts should not.
  • You will receive a capital gain from the property and also earn an income once you have retired.
  • Liquidity in real estate can be a problem from time to time. The transaction costs involved are also very high and there is the hassle factor of maintenance and finding tenants. If you hire a management company to do this, then this will reduce the rental income. A balanced fund is liquid within a week and is hassle free.
  • Property prices are very interest rate-sensitive and rates are expected to continue to rise in the short term.
  • The long-term average return from SA residential property is lower than portfolios with high equity holdings.