For years I’ve been telling everyone to buy property. Dump your annuities, get into property. Save, downscale, sell your wife, do whatever you need to, but buy property. Now I’m changing my tune – dump your properties, get into shares.
Over the last year, that’s exactly what I did: I’ve sold all but one property and have invested everything in listed shares. Don’t get me wrong, property is still a great investment (annuities aren’t – they are ####!) but it’s definitely not the best – my experience. Here are 5 reasons why:
1. You don’t have to deal with any council.
Think of the most frustrating task you ever had to do, multiply the frustration with 5 and you get to deal with City of Joburg. Before you can buy/sell property, you need to get a clearance certificate from council that all levies are paid up to date. You will be faced with absolutely no assistance and shocking service. In the last year I’ve paid R40k+ (that wasn’t really due) to City of Joburg just to get clearances. It’s a no-win situation and at the end you just pay whatever they say to get whatever you need. With shares, you sell and buy whatever you want, whenever you want.
2. You can’t sell your bathroom.
You’ve invested all your cash in property and suddenly you need money. You can sell a property or take a bond and you will have cash in 3 months if you lucky. If the market is down, you will most likely have to sell at a loss. With shares, you can just sell what you need, it is immediate and when you get the cash back, you can buy again. Instantly.
3. Shares can’t phone you on a Sunday with a leaking geyser.
You don’t have to deal with tenants… No need to say more!
4. Entry and exit costs are huge.
When you buy property, the costs are huge. When you sell property, the costs are huge. Let’s take an average 2 bed flat in Joburg for R650k. Your total cost to buy and bond the property will be around R30k. To sell that same property, will cost you around R35k. R65k just to buy and sell – that’s 10% of the total cost. Goodbye capital growth. Shares? About R100 per transaction to buy/sell. You make the sums.
5. You will make more moolah.
If you want to buy shares for the short term, your chances are 50/50 to make a profit/loss. But if you buy for the long term – you WILL have substantial capital growth. In the last 40 years, not once would you have lost money if you invested for 5 years or more on the JSE. Take that, no real costs when buying/selling and no maintenance costs and it is clear that shares are the obvious choice!
Agree? Don’t agree? Let me know what your thoughts are!
Bottom line from my side – Get into shares!! Save, downscale, sell your wife, do whatever you need to, but buy shares!