Harbour & Associates

If you’ve read my blogs on Investing in Property and on Trusts, or if you’ve been to see me for a no charge chat, you’ll know the right structure for your investments. But how do you fix it if you got it wrong in the first place? I call this unscrambling eggs! If you own investment property in your own name and want to sell it to your trust you’re in for two taxes – Transfer Duty at up to 13% and CGT at up to 18%. You’ll…

Property is, in my view, a great investment but you gotta get it right! Here’s a trap that you hadn’t thought of – Let’s say your company buys a property using a 10 year bond on which the repayments will be R10 000 per month and the rental income is R10 000. Ignoring everything else, the cash flow is zero right? Wrong! Of that R10 000 bond repayment about R9 000 is deductible interest and R1 000 is capital repayment which is not deductible, so the company will be in for tax on R12 000 in the first year, which…

I’m often asked how to go about buying investment property. How and where do you look for the bargains? I think it’s important to understand first off that the bargains are the result of distressed sellers (that is, owners who for one reason or another have to sell). A distressed seller can arise from – a death where the executor of the estate needs to liquidate the assets in order to distribute them equitably, – a divorce where the asset has to be split between two parties – a re-location where the owner(s) are moving to another town/country – a…

Let’s start with the words first and see what they mean – Usufruct is the right to make full use of an asset without ownership. So, if you have the usufruct over a property, you can live in it, rent it out, holiday in it, but because you don’t own it, you can’t sell it. Bare dominium is quite simply ownership without the right of use (usufruct). So, if you have bare dominium over a property, can you sell it? Only with the consent of the usufruct holder, otherwise you would be depriving them of their right. Now, put usufruct…

We’ve had bit of cash that needed to find a home, so over the Christmas break I had a look at our buying a small residential unit in a secure development. I live in Fourways, so targetted the Douglasdale area for my research. My previous investment properties have largely been bought in crummy areas of Johannesburg at sherrif’s auctions but that is a very messy, high risk, high return game and frankly, I’m getting a bit tired of all the hassles that go with those properties. I based my research on what I guess most of you would be thinking…

Now, back to the question. Do we buy commercial or residential property? I suggest you start with residential as the numbers tend to be smaller. Other than that, the returns on commercial property tend to be somewhat better but it is more difficult to get a bond (usually requiring a 30% deposit, compared to from 20% to zero). Be careful when letting residential property. If your tenant(s) include aged or infirm people or young babies, you will find it much more difficult to obtain an eviction order.

So you’re going to start investing in property. Should it be commercial or residential? I guess the best way to answer that is to point out that residential properties tend to be less expensive than commercial and since we’re just starting out on this journey, let’s stick to playing with money that we can afford to lose. Now, nobody wants to lose their money, but all investments (hey! all things we do in life) carry some risk and we don’t want a bad one…

While you are still in the work to live, to eat, to sleep, to get up again for work stage of your life, you must not lose sight of the fact that you’ll want to (or have to) retire one day. When that day comes you’re going to need income that you don’t have to work for. Passive income! One of the best forms of passive income has got to be rental income from fixed property. You might need your zimmer frame to collect the rent but when that packs up you can always pay an…

Transfer Duty is payable on most fixed property transfers except where the sale is subject to VAT (see how this works here) and is the same whether the buyer is a trust, a person or a company. The rates are as follows- 2012 (agreement on or after 23 February 2011) Buyer Value Rate Any R0 – R600 000 0% Any R600 001 – R1m 3% on value above…

The taxes relating to sales of fixed property vary enormously depending on who or what is the buyer and who or what is the seller. They also depend upon whether it is residential property or commercial property and in the latter case whether the buyer and or the seller is VAT registered. The following diagram summarises just some of the possibilities. Should you wish to make an appointment, please feel free to visit Derek’s diary and book a time that suits you. . Need a shelf company or CC, a tax clearance, VAT registration or B-BBEE certificate? We…

Owning investment property (that is property that earns rental) is one of the most important means of building passive income for retirement. However, it is most important that the property be owned in the right structure. This has been made easier now that Transfer Duty is the same for companies and trusts as for individuals, Unfortunately, there is no “one size fits all” and you really should get expert guidance before buying. Derek Springett provides this guidance at no charge. Click here to set up an appointment. Here are some general guidelines…

Investing in Property

How to fix a bad investment structure

Property investors beware

How to buy property

Usufruct and bare dominium

Property investment returns

Commercial or residential?

Play with the right numbers

Getting excited about investment property

Transfer Duty

Tax on Property Sales

How to Own Property

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