FINANCE WELLNESS COACH: Weighing up owning a rental property against investing in a balanced fund
A R700,000 Johannesburg apartment promises a 20% gross rental yield, but tax, levies and risks complicate its comparison with an investment fund.
A Johannesburg apartment is advertised for R700,000 with a 20% gross rental yield, but additional costs and risks complicate its comparison with a diversified investment fund.
The apartment generates R144,000 annually in rental income, with a net yield of 12% after accounting for levies, expenses and income tax. In contrast, investing the same amount in a balanced fund could yield an average annual return of 10%, growing the capital without the responsibilities of property ownership.
While the property investment shows a slightly higher value and additional gains from rental income reinvestment, it also entails risks like tenant issues, repair costs and capital gains tax (CGT). Conversely, a balanced fund offers tax-deferral on CGT until sale, potentially higher returns, and more flexibility to access funds.
When deciding, consider factors such as long-term growth, tenant reliability, tax efficiency, risk tolerance and investment flexibility. Ultimately, the optimal choice depends on balancing after-tax returns, risk, and peace of mind.
Written by urgent.news from Daily Maverick's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
