IS YOUR PRIVATE PROPERTY YOUR ASSETWhen looking at your balance sheet your asset will show items like furniture, personal belongings, vehicles and your personal property. The question is, are these items really assets.Most will say……stop…..my personal property is my asset. I'm receiving capital gain on it! Lets do a quick calculation and decide again if it is one.I will assume an outstanding bond of R 1 million on a property bought for the same amount. The bond repayment will be +- R 10,000 depending on the interest rate of the bank. Estimate rates and taxes at R 1,000 per month. Property appreciation at +- 10% per year. I will do the calculation for 5 years. Cash outflow for five years Bond repayments R 600,000. Rates & taxes R 60,000. Total estimated cash outflow R 660,000. Cash inflow for five years R 0 Capital gain for five years R 610,510 From this example you will receive a negative cashflow of R 49,490 (R 610,510 - R 660,000).Still think your own house is an asset. I am not saying one must not own your own house. I am not saying one must rather rent. I am just pointing out that your personal property is not really the asset you thought it is. Now, lets use the same example as above but for an rental property that one receives a rental of R 6,000 per month Cash outflow for five years Bond repayments R 600,000.Rates & taxes R 60,000.Total estimated cash outflow R 660,000. Cash inflow for five years R 360,000 Capital gain for five years R 610,510 From this example you will receive a positive cashflow of R 310,510 (R 360,000 + R 610,510 - R 660,000). This is an asset that provides positive cash flow and passive income.
Why it is still important to own your home
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