Reconsidering the worth of rental properties as retirement nears

We will be retiring at the end of the year and have several investment properties in Cape Town that we rent out. We want to use the income from these properties to supplement our pension.

- Kenny Meiring

I recently took a close look at the rental income we are getting, and when I deducted the costs of the levies and insurances, I realised that these properties are only generating an after-cost income of R22,000 a month, which is less than the R30,000 we need. The properties are worth R9-million.

What should we do?

There is a lot of merit in buying property when you start out on your financial journey. The big advantage is the concept of leverage. You pay a deposit on a property and take out a loan for the balance of the purchase price.

Over the years, you get the capital growth on the full value of the property (not just your deposit). If your monthly bond repayments are pretty much the same as the rental you have been paying for a property, then buying property is a great way to build up long-term wealth.