Investing In Property

6 tips you need to read before investing in property

August 25, 2016 in Investing In Property

Handled correctly, an investment property is a great asset that appreciates in value, can be rented out to earn an income and it’s a great banker in your capital growth and retirement strategy.

There are two primary reasons why people invest in property:

• Buy to rent – once you have purchased the property, it is rented out to produce a rental income. Essentially you are looking for a trusty tenant to pay as much of the bond costs as possible that you have in place.

• Buy to resell – often referred to as ‘flipping’, if you have an eye for fixer uppers and a passion for renovation, many people find good money in buying properties to fix up and resell for a higher price than the initial price plus cost of renovation.

Both of these are sound investment options if you know what you are doing. Investing in property is a long term strategy, so you will need to be sure that you have the cash flow and funds to maintain your repayments and weather any financial stress down the line. You don’t want to have to sell your investment property until you are ready to do so, and only when market conditions are in your favour. If you falter and buy a dud, you could find yourself in serious financial constraints and horribly out of pocket.

Here are some important considerations when looking to invest in property:

1. Know your strategy and invest with that in mind: If you are buying to rent, you need to know what the realistic rental income for the area and type of property is, how much you need to spend on any required repairs or maintenance, commissions due to a rental agent, and then cover your transfer and bond costs, taxes, interest, insurance and so on. You may have some shortfall initially that you need to cover, but over time the property should be giving you a healthy return. Ensuring that you have a steady rental income is important as the cash flow will make keeping the asset more affordable. Also make sure that your property suits the demographics of renters in the area – an open plan family home with a large garden won’t perform in an area close to a university unless you plan on converting it to a student digs! If you’re buying to flip – renovate and resell – you need to know what your costs are to renovate, what the potential selling price could be based on similar properties in the area. You will also need to take into consideration bond and transfer costs, interest and insurance until you do re-sell, which all impact whether you actually make a profit at the end of the day. Buying to flip will require that you acquire an asset that is well below its market value – typically stressed properties and urgent sales – and for this you need to be patient.

2. Make sure you can afford it: Investing in property is a long term strategy, so be sure you can afford any bond repayments and costs over the long term. If the property stands empty while you look for a trustworthy tenant, can you manage the repayments? If your renovations take longer than expected, or the property does not flip as quickly as you had planned, can you carry the costs in the interim? Make sure you factor in costs such as rates and taxes, maintenance and capital gains tax into your budget.

3. Get a good rental agent: A rental agent or licenced real estate agent that is experienced in managing rentals is an asset and will go a long way in managing things for you and your tenant. They will thoroughly screen the tenants to ensure they have a good payment record and can afford the rental. Once a good tenant is found, they then also provide advice on contracts, rental rates, your rights and responsibilities as a landlord, sort any maintenance issues and do regular check-ups to ensure that your tenant is looking after your property appropriately.

4. Research the area you are buying in thoroughly – Estate agents and bond originators will be able to assist with a roll of all property sales in the area for you to compare against and you can also arrange for an independent valuation to be done if you are unsure. Banks have valuable data on property values in different developments and areas which is helpful in ensuring that you don’t pick the wrong investment property. Estate agents can also assist you with determining the potential for rental income based on other rentals in the area. Check out the local amenities that would make your property more appealing to tenants or buyers. Are there open stands in the area which could be a hotspot for crime or property developments that could impact the future value of your investment?

5. Make the property attractive to renters or buyers: Whether you’re planning to rent the property out or flip it for profit, make the property attractive to whoever is going to live there. Stick to neutral colours and keep the bathrooms and kitchen in good condition. A well-kept property will attract better quality tenants, and if you’re reselling, a buyer will more easily be able to see themselves in the property if it does not have your personal signature stamped all over it.

6. Get an independent property inspection and a Hollard home warranty: Make sure that the investment property you are buying is exactly that, an investment and not a liability. Hollard’s Home Warranty addresses the issues around defects with a professional property inspection that is coupled to an insurance policy. This protects you as the buyer against the financial ramifications of any hidden defects that may emerge in the property for two years after taking transfer. When you’re stretched to the max with deposits, bond and transfer costs, municipal deposits, renovation costs and a growing property portfolio, the last thing you need is unplanned bills to fix hidden defects. When buying to rent additional unplanned expenses can significantly impact on the viability of the rental return. If you do find a great fixer-upper deal, albeit with a few problems, you won’t end up walking away from a great deal because you overestimate the extent of and cost to fix minor problems. When flipping the property, selling a renovated house with a Hollard home warranty assures the new buyer that the renovation has been done properly and they can safely fall in love with what looks fabulous and so ensure you the best possible price for the house. And the cost of the warranty can be covered within the total price of the house – all you have to do is include it in your Offer to Purchase and the premium can be paid from the proceeds of the sale!

When it comes to investing in property, the last thing you need is hidden suprises that can eat away at your profits and future returns. Making sure the homework is done by professional property inspectors is the first step towards peace of mind that you’re making the right investment. The next step is transferring the risk of undetected defects to an insurer.
A Hollard Home Warranty should be an integral part of your property investment strategy for peace of mind and the best possible return on your investment.

Source: http://www.privateproperty.co.za

Top 10 Residential Estates in South Africa for 2016

August 25, 2016 in Investing In Property

South Africa has numerous top residential estates and property in these locations is highly sought after, with prices ranging from R2 million to R50 million.

This magnificent villa for R35 million in Val de Vie Estate, has 4 bedrooms en suite and encapsulates ‘Winelands living’, offering spectacular views. No expense was spared in the design and the sale includes all furniture.
Andrew Amoils, head of research at New World Wealth, says it’s interesting note that “South Africa is a global pioneer in residential estate living – it has more golf and lifestyle estates than any other country in the world”.

According to the latest 2016 Estate Ratings New World Wealth Report, seven out of ten are in the Western Cape and the top-ranked estate is Val de Vie in the Paarl Franschhoek Valley, followed by Zimbali on the KwaZulu-Natal North coast and Fancourt on the Garden Route. Steyn City in Fourways was ranked fourth with Highland Gate in Dullstroom in ninth position.

The estates are rated on a number of criteria: security, activities, facilities, quality and design of houses, space (average stand size and space between houses), as well as views, scenery and wildlife, appeal to wealthy buyers, and resale and price growth potential.

1. Val de Vie 

This beachfront home in Zimbali Coastal Resort & Estate, Ballito, has 5 bedrooms, 6 bathrooms, gourmet kitchen, cinema room, and fabulous pool deck area. It is selling for R29.95 million.

Val de Vie It is located in Paarl in the Western Cape and is the top estate for 2016. Val die Vie recently merged with Pearl Valley, which was the top-rated estate last year. Highlights of the combined estate include: vineyards, polo fields, an equestrian centre, a highly rated golf course, natural fynbos scenery, parks, lakes and mountain backdrops.

House prices on the estate range from R5 million to R40 million.

Val de Vie contains the exclusive Gentleman’s Estate, which offers residents their own private stables, garden and vineyard. Properties on the Gentleman’s Estate range from 3 to 6 hectares each.

2. Zimbali

Zimbali is located next to Ballito, 45km north of Durban. “It is arguably the most picturesque estate in the country, with its own natural lagoon and forest,” says Amoils. “The bird-life on the estate is very impressive – it is home to several types of kingfishers, bee-eaters and even the rare Crowned Eagle is a resident (the largest eagle in Africa).”

This 3 bedroom colonial-style thatch home in Fancourt, George, offers a golf resort lifestyle in a tranquil setting. It is on the market for R6.4 million.

3. Fancourt 

Fancourt is located in George on the Garden Route. “It is undoubtedly South Africa’s top estate for golfers, with three highly rated courses on one estate,” he says. “The two original courses (the Montagu and the Outeniqua) were built in the early 90s, whilst the world-famous Fancourt Links was added in 2000.”

There are several different residential areas on the estate including: Links Ridge, Links Avenue, Cape Dutch Village, Oakland’s Village and Montagu Ridge.

House prices on the estate range from R3 million to R50 million.

4. Steyn City

Steyn City is a new estate located between Fourways and Lanseria in Johannesburg. The 900 hectare estate offers apartments and houses and is the largest estate in the country in terms of land size. It currently includes an equestrian centre, golf course and over 250 hectares of landscaped parkland.

This new and modern home in Steyn City, Fourways, offers a secure lifestyle surrounded by parkland and and the golf course. It is on the market for R18.8 million.

“The communal areas, vegetation and parklands on the estate are particularly impressive, as is the bird-life,”” says Amoils. “The estate is still at early development – there are plans to add two private schools, offices, convenience shopping, a retirement village and a private hospital.”

Once fully complete, Steyn City will be the most extensive estate in the country, in terms of facilities and activities. House and apartment prices on the estate range from R2 million to R30 million.

5. Pezula 

Pezula is located in Knysna on the Garden Route and includes two sub-estates, namely Pezula Golf Estate and Pezula Private Estate.

This Pezula Golf Estate property has 5 bedrooms and a veranda, golf course and lagoon views. It is selling for R4.95 million. House prices on the estate range from R5 million to R40 million.

6. Whalerock Ridge

Whalerock Ridge is located in Plettenberg Bay on the Garden Route. The 100 hectare estate offers residents impressive views over Robberg Beach. The bottom gate of the estate is located approximately 100 metres from the beach.

“Notably, Whalerock Ridge is the only estate in our top 10 that does not have a golf course,” says Amoils.
House prices on the estate range from R3 million to R35 million.

7. De Zalze

De Zalze is located in Stellenbosch in the Western Cape. The 300 hectare estate is also a working farm, comprising 120 hectares of vineyards, citrus orchards and olive groves.

It is home to a particularly scenic golf course and three top restaurants.

This home in De Zalze Winelands Golf Estate has grand proportions, space and views. It is on the market for R17.7 million. House prices on the estate range from R5 million to R20 million.

8. Atlantic Beach

Atlantic Beach is the “hidden gem” of South African golf estates, says Amoils. Located between and Melkbostrand in Cape Town, it is home to some of the most spectacular houses in the country.

The estate also operates as a wildlife sanctuary, with several wild animals such as antelope living on the property.

It is relatively well priced compared to other estates in the top 10 – house prices on the estate range from R2 million to R15 million.

9. Highland Gate 

Featuring a completed Ernie Els signature golf course, new clubhouse and spectacular hiking and fly fishing, Highland Gate Golf and Trout Estate in Dullstroom is the ideal weekend getaway.

Highland Gate Golf and Trout Estate is a newly-built estate located in the Steenkampsberg mountain range near Dullstroom. It features an Ernie Els designed golf course, fly-fishing and hiking trails.

House prices on the estate range from R2 million to R10 million.

10. Arabella 

Located on the Bot River Lagoon in Kleinmond, 25 miles west of Hermanus, Arabella is a “hotspot for wealthy second-home owners”, says Amoils.

Only a few of the holes have houses on them and as a result stands are limited – there are only 236 houses on the estate. House prices on the estate range from R3 million to R15 million.

Source: Property 24

Is There a Cut-off Age for Investing in Property?

March 31, 2016 in Investing In Property

Buy-to-let properties are an excellent way to generate income during retirement, but how late is too late to get into the game?

High inflation and currency devaluation can wreak havoc on conventional retirement savings, which is why an appreciating asset and an income stream that increases in line with living expenses can literally be a lifesaver.

There are pros and cons to buying a rental property at retirement age.

Any long-term retirement investment is going to be better the earlier you get started, and buy-to-let is no exception to that rule – but that doesn’t mean it can’t be a viable option in your sixties, or even your seventies. However, it does depend a lot on your existing financial position.

The delay between purchase and income stream is the main downside of buy-to-let at or after retirement.

Rental income can go a long way towards paying off a mortgage, but it’s quite difficult to cover all your costs with rent alone these days.

In fact, you could be paying into your buy-to-let investment for years before you see any actual profit, which can be difficult when you no longer have a salary coming in at the end of every month.

Financing itself can also be trickier the later in life you apply, as many banks have a cut-off age after which they simply won’t grant a long-term loan.

The age limits vary from bank to bank and do depend on your financial history and relationship with the institution in question. It’s not unusual for older loan applicants to be limited to five- or ten-year loan terms, however, which can seriously affect the affordability of the investment.

A retired person will struggle to get a bond due to the inability of financing repayments over a shorter period.

Even if you do qualify for a loan at a rate you can afford to cover until your investment turns a profit, you will have tied up a significant amount of capital in an asset that’s not terribly easy to dispose of in an emergency.

Even if you invest later in life, having that kind of security in future is invaluable, especially considering there is no ‘sell-by-date’ on a rental property – it can last a lifetime.

Property makes a great nest egg and can certainly be sold for a profit down the line, but that process can take a few months and isn’t going to help if you need quick access to a lot of cash.

You may be able to use the equity in your loan account to cover emergency expenses, but the majority of your capital will be tied up until you decide to sell.

These kinds of downsides aren’t exclusive to buy-to-let, however, and many long-term investments will have similar restrictions.

Where income-generating property really stands out is in the benefits it offers, which are significant enough to have made it one of the most popular asset classes around the world.

The first benefit of buy-to-let is the comparatively low risk profile.

By generating income to cover some – and later all – of its costs, it minimises the potential losses if things go wrong. This is very attractive in retirement when most people are looking for financial security, rather than risky speculation.

In addition to this, buy-to-let is one of the few investments that is almost guaranteed to keep pace with inflation, thanks to rental escalation and capital appreciation.

High inflation and currency devaluation can wreak havoc on conventional retirement savings, which is why an appreciating asset and an income stream that increases in line with living expenses can literally be a lifesaver.

Even if you invest later in life, having that kind of security in future is invaluable, especially considering there is no ‘sell-by-date’ on a rental property – it can last a lifetime.

This potential is the key to the appeal of buy-to-let as a retirement investment, and is still very accessible at age 60 or 65.

The longer you wait, the more difficult it becomes, and the more secure your finances need to be in the interim, but it’s never too late to buy to let successfully if you’ve done your homework first.

Source: www.property24.com

5 Quirky Factors That Influence House Prices

March 14, 2016 in Investing In Property

Quirky FactorsWhen it comes to property prices, many of us assume we know the factors that contribute to the value of those sky-high listings. Location, great design and finishes, as well as plenty of space, right?

Sure, there are some basic features that will always affect the perceived value of a home, but you should never underestimate those quirky little idiosyncrasies that influence buyers without their conscious knowledge.

Well, according to research done by some residential property experts in the UK, things aren’t actually as cut and dried as we might think. In fact, subconscious psychology may be playing just as big of a role in purchase decisions as straight-up facts.

There is definitely a great deal more to property purchases than just an objective assessment of the facts.

Here are a few factors that have a dramatic effect on a property’s price:

1. Name of a road

One such idiosyncrasy, discovered by the UK property website Zoopla, is that the name of a road can have a dramatic effect on a property’s price. According to their research, British addresses containing the word ‘Warren’ list for more than twice the price of properties with more mundane street names.

Here in South Africa, it seems buyers are less drawn to quaint and romantic monikers, but we definitely have our own distinctive price trends that can be seen in street names.

The top five most expensive streets in South Africa aren’t streets at all.

In fact, addresses with the word ‘Street’ in them are quite rare on the luxury property chart-toppers. ‘Road’ features the most often on the most expensive address list, with ‘Avenue’ taking second place.

For those of us stuck with a ‘Street’, ‘Close’, or ‘Way’ in our address, don’t worry, there’s hope for us yet.

2. House with a name

As it turns out, it’s not only street names that affect prices – houses with their own names also tend to sell at a premium when compared to equivalent, nameless, properties.

A house with a name is often perceived as a house with a history, or a unique and individual personality. Buyers like to feel that they’re getting something that no-one else can, and a name is one way to encourage that impression.

After all, what sounds more enticing: 22 Park Street, or Parkside Manor?

3. Water views

Views are another factor that aren’t quite as rational as we may think. While we all know that a picture-perfect outlook adds a hefty whack to any listing price, did you know that water views almost always outweigh landscapes, both here and overseas?

In fact, UK researchers have found estuary and harbour views command premiums of up to 82%, while here in SA many of our most expensive properties – including Camps Bay’s R450 million Casablanca – are ocean facing.

4. Odd house numbers

The human attraction to water may not come as too much of a surprise, but buyers’ preference for odd house numbers is a little trickier to explain. British researchers have found a direct correlation between house number and price, with even and high numbers achieving notably lower sales prices than their odd counterparts, on average.

This one isn’t quite as weird as it seems at first glance.

It’s about space and privacy. Low house numbers are popular because they often indicate a smaller, more exclusive street, while the preference for odd numbers is most likely weighted by the popularity of house number one – the first on the street.

As an end plot, often on a corner, the first house tends to have fewer direct neighbours and more space than houses in the middle of the road.

5. The slope and attractions of a neighbourhood

Other unexpected factors that appear to have a direct effect on property purchase behaviour include the slope of a neighbourhood – the hillier the better, the existence of a local farmers’ market and the quality of supermarkets serving the area.

All these elements may, at first glance, appear unrelated, but there is a common thread running through them all.

It’s all about our natural, human desire to feel special. If a property feels unique, more charming, more exclusive, expensive, or better-loved than others similar to it – whether it’s for logical reasons or because it triggers a subconscious reaction in us – buyers will respond positively and ascribe more value to the sale.

If you can harness that reaction, the sky’s the limit.

Source: www.property24.com

Why Now Is a Good Time to Buy Sa Rental Property

March 14, 2016 in Investing In Property

Why now is a good time to buyAgainst the backdrop of an economic downturn with rising inflation, volatile markets and increasing interest rates, the South African property market can be expected to react.

With the average house price having already fallen by 0.8% year-on-year to November 2015, prospective buyers have an edge in a down market with seller’s negotiable on price, says Subbramoney.

Praven Subbramoney, CEO of FNB Private Bank Lending says investing in property should be a real consideration – especially when the rental market demand is expected to increase due to fewer buyers entering the market.

He says property investment can take different forms, and building a rental portfolio can be as simple as acquiring property that will generate regular income while growing in value over time.

“Investors can also venture into local and offshore properties or listed property shares. It all depends on individual circumstances, affordability and risk appetite,” says Subbramoney.

Based on current trends, he says investors may be encouraged to look into rental property as an investment since demand for rental properties is projected to increase, predominantly within the entry-level residential sector where many first-time buyers might find it more difficult to qualify for bonds.

In addition to affordable lock-up and go properties, Subbramoney says there are other ‘non-traditional’ residential properties which can be considered, including student accommodation and retirement properties.

Subbramoney says if properly managed, such properties can prove quite profitable in the long run.

“Of course there are certain conditions which need to be met if an investment property is going to pay off, especially in an increasing interest rate environment, which could erode rental yields,” he says.

“Fundamentals such as the location, quality of the construction, cost of servicing and maintenance, surrounding amenities, prospective property demand as well as historic and projected property price growth all need to be carefully considered.”

When leasing, Subbramoney says it’s also imperative to ensure as far as possible that the tenant is financially sound and that the rental agreement provides scope for inflation linked increases.

“This will allow the investor ample room to cushion against relative volatility and changes in the economy,” says Subbramoney.

Source: www.property24.com

Property investment 101

March 2, 2016 in Investing In Property

Property has long been a popular option for investors. Here are some tips on types of property investments available in South Africa.

The world seems to have entered a particularly tumultuous period. Both locally and abroad, confidence and certainty are at a low ebb, civil unrest is common and ‘disruptors’ are increasingly shaking up entire industries.

In challenging times, it can be difficult to decide where and how to invest. Given the inherent nature of capital – which as one economist recently stated is a ‘cowardly’ thing as it goes where it’s safe and can grow – deciding where to invest is that much harder. For many, the only option is to invest in ‘safe haven’ assets such as property.

Traditionally, property has long appealed to those seeking a place to ‘park’ their money because it tends to retain and gain in value, albeit over the long term. It can also be used as a useful mechanism for diversifying an investment portfolio. In South Africa, there are several ways in which to invest in property.

Primary property investment:

Many aspire to owning a property as it represents security, a legacy and a place to call your own. In order to own a property, most people have to apply for a home loan which, used responsibly, can also be an effective investment tool.

Increasing the payments on a home loan above the minimum requirement can reduce the term which translates into significant savings. Home loans which have had extra funds paid into them can also potentially be used to fund business ventures or home improvements (which ultimately should add to a property’s value) at a far lower interest rate than unsecured, short term loans.

Of course there are several other ways in which a primary property can be used to bolster and diversify an investment profile. Over time, your property should also appreciate in value which will stand you in good stead in the long run.

Buy-to-let investment:

Investing in buy-to-let properties whether they be residential, commercial, retail or otherwise is a tried and tested model which, if managed well, can prove particularly profitable. Of course there are certain fundamentals which need to be met in order for this type of investment to succeed, especially in an increasing interest rate environment which can eat into rental yields.

Basic fundamentals include location, property type and quality, running costs, demand and the potential for property price growth. Potential tenants must also be thoroughly vetted and the rent should cover the bulk of the costs relating to the property, including any applicable management fees.

Investing in residential buy-to-let property is fairly straightforward. Other types of property such as those which fall under the commercial, retail and industrial banner require a more nuanced approach and specialised management.

Over time, buy-to-let investment properties should not only cover all of the costs but produce a profit too. Once paid off, the profit can increase significantly and the property should also have increased in value, which theoretically should place an investor in a particularly strong financial position.

Offshore buy-to-let investment:

For those who can afford to, investing in buy-to-let property offshore can be very attractive. By investing offshore, investors can effectively buffer themselves against South Africa’s economic and socio-political headwinds.

Specifically, investors can earn a foreign and in all likelihood stronger currency, and possibly even gain citizenship through various incentive programmes which have been implemented in a number of countries with a view to attracting investment.

Of course the same principles which apply to local buy-to-let properties apply offshore too. Contracting the services of a reliable, efficient offshore property management service is also key if you are going to go this route.

Listed property funds:

Local and offshore listed property funds will appeal to those who don’t necessarily want exposure to the issues associated with bricks and mortar ownership but still want to benefit from the underlying strength of this asset class.

By definition, listed property funds are funds which invest in real estate. The properties are managed by listed property companies which are essentially buy-to-let specialists and the yields generated (less management costs etc.) are distributed between investors.

Locally, investors can invest in listed property through Real Estate Investment Trusts (REITS) or Property Exchange Traded Funds (ETF’s).

Don’t bite off more than you can chew:

There are other ways to invest in property. If in doubt about any of the investment options, speak to your investment advisor. Whatever the case, you should always invest well within your means and have reserves in place. Lastly, property investment should be done with a long term view and should form part of a balanced and diversified investment portfolio.

Source: www.privateproperty.co.za

6 costs to pay on top of your bond when buying property

August 6, 2015 in Investing In Property

When it comes to purchasing a home there are more financial elements to take into consideration than just the home loan repayment.

While the bond repayment is a major consideration, there are also a number of other costs that a potential home buyer will need to make provision for.

Very often when buyers are looking for a home that they can afford, they look at how much they will need to pay on their bond each month. But it is important to remember that buyers are also responsible for the costs of registering the new bond, as well as the transfer costs.”

Transfer costs include both the conveyancing fees and transfer duty, which is calculated on a percentage of the purchase price. The percentage charged for the transfer duty can vary depending on the buyer’s legal status.

The buyer is also liable for an initiation fee on the bond and the cost of having the property inspected.

It is often easy to overlook these costs when assessing affordability and establishing a purchase price that is within the budget, especially if it is the first home that the buyer is purchasing.

However, as these costs will affect the total financial layout of the property purchase, it is vital that they are taken into consideration.

Having a clear understanding of what they are financially liable for will assist buyers to prepare for the costs of buying a home before they take their initial steps towards entering the market.

Knowing all the costs involved upfront will ensure that the buyer is not caught unaware, having to pay out thousands of rands with very little notice.

A reputable, experienced real estate professional will be able to provide the buyer with a schedule of costs they can expect to pay.

Here is a basic rundown on the costs that buyers can expect to pay:

1. Deposit

While not completely unheard of, it is very rare that banks will provide a 100% bond.

This means that the majority of buyers in today’s market will require a deposit based on a percentage of the home’s purchase price.

Generally buyers can expect to pay a deposit of between 10% and 30% of the purchase price of the home. The deposit is usually kept in an attorney’s trust account until the property is transferred into the buyer’s name, and the money will accrue interest payable to the buyer.

The deposit amount will be stated in the offer to purchase presented to the seller.

2. Registration costs

Generally buyers can expect to pay a deposit of between 10% and 30% of the purchase price of the home. The deposit is usually kept in an attorney’s trust account until the property is transferred into the buyer’s name, and the money will accrue interest payable to the buyer.

The registration cost is the amount charged by the bank to register the bond. On a bond of R1 million with no deposit paid, the registration cost will be in the region of R12 859.20, excluding transfer costs.

If a deposit of R100 000 is paid, bringing the bond amount down to R900 000, the registration cost would be in the region of R11 764.80.

3. Transfer duties

The South African Government levies a tax on property transactions that is paid when a property bought and transferred into a buyer’s name.

If purchasing vacant land, the transfer duty is based on the value of the land.

However, transfer duty on an existing home will be based on the value of the land and building. Transfer duties are not charged on homes priced under R750 000.

A 3% transfer duty rate will be charged on property priced between R750 001 to R1 250 000, for properties priced from R1 250 001 to R1 750 000 the transfer duty will be R15 000 plus 6% of the property value above R1.25 million.

Properties between R1 750 001 and R2.25 million will incur a transfer duty of R45 000 plus 8% of the property value above R1 750 000, while transfer duty for properties over R2 250 001 will be R85 000 plus 11% of the value above R2.25 million.

If the property is purchased in the name of a CC, company or a trust, a standard transfer duty of 10% of the purchase price will be charged.

Should a property be bought from a developer, a VAT portion will be paid, rather than the transfer duty on the purchase price.

4. Conveyancing fees

These are the fees paid to the conveyancing attorneys to register the property into the buyer’s name and for the bank appointed conveyancing attorneys to register the bond over the property.

Recommended tariffs for conveyancing fees have been set by the Law Society, and these costs are based on the property’s purchase price. The higher the purchase price, the higher the fees.

5. Deeds Office registration fees

The Deeds Office will complete all that is required to register the bond into the buyer’s name, and a fixed fee of around R800 is payable for this service.

Deeds Office registration is the final step and takes approximately 15 days.

6. Stamp duties and admin fees

Stamp duty is a government tax payable by the purchaser when a property is sold. There will also be sundry costs payable to attorneys for postage and other items. Postage and sundry costs are generally around R150.

In order to avoid any surprises, it is important that the buyer prepares for purchasing a home by saving up for all the costs involved.

Having the required finances in place before embarking on the home buying process will make it far simpler.

Source: www.property24.com

Are you really ready to buy?

July 8, 2015 in Investing In Property

There are many economic factors that determine whether it’s a good time to investment in property or not.

Global economic concerns, riots, strikes, terrorism and various local socio-economic issues are all contributing to a general feeling of unease which may put off buyers from committing to property purchases. Although local and global sentiment is not exactly flying high, those in the know are still inclined to say that property is a solid, secure investment and that it’s better to get off the fence and commit to a purchase – but only if you’re ready for it.

If issues such as crime and socio-political uncertainty are putting you off committing to a purchase, perhaps now is a good time to take a step back and take stock of your situation and decide where you want to be in the long term. Yes we have issues but which country doesn’t? Issues aside there is still a lot going for South Africa. For example, our banking and financial systems are generally sound, many enjoy a comparatively high standard of living and the country is imbued with an abundance of resources.

In terms of purchasing versus renting, there are arguments for both, it just depends where you are in life. If you are ready to put down roots and possibly have a family, you will probably want to purchase a home. However after giving the matter some real thought you may discover that you actually want to go in a different direction entirely and go backpacking for a year in which case renting is probably best. Purchasing a home is not a minor or (generally speaking) short term commitment and shouldn’t be taken lightly.

Although comments have been made that South African property is due for a price correction, history has shown that in the long term, property values tend to stabilise and increase.

It’s also useful to keep in mind that the property market by its very nature is cyclical and that every cycle has its ups and downs which is why if you are ready to buy, rather do so now with a view to benefitting in the long run, rather than trying to time the market.

Those who want to get into the property market also need to keep in mind that property is no longer a ‘get rich quick’ mechanism. The heydays of the pre-recession property market are long gone which isn’t actually a bad thing as today’s market is more reflective of a healthy property scenario.

It’s worth noting that if you’re not sure which direction you want to move in, chances are you’ll have to resign yourself to the fact that you might have to rent for some time to come as bank lending criteria probably won’t ease up anytime soon. There’s also a possibility that there will be an interest rate hike before the end of the year which could make things more difficult in terms of obtaining a home loan if you sit on the fence for too long.

The Reserve Bank’s official repo rate has remained at historical lows for some time now. Such low levels cannot be sustained forever and interest rates will inevitably inch upwards at some point again. Similarly, if you’re holding off in anticipation of a rates cut, the chances of this are slim. Many analysts believe the central bank would be loath to cut rates in an environment where wage demands far exceed inflation and the potential for further Rand depreciation exists.

With this in mind, it’s best to rather get off the fence one way or another and secure a home loan at a reasonable rate now if home ownership is something you aspire to. Failing to do so could cost you in the long run as higher interest rates add considerably to the cost of a home loan over the years. That said, the ‘right’ time to buy should be when you are personally and financially ready and not when society or those around you say you are.

Source: Private Property (www.privateproperty.co.za)

The hidden costs of buying property

June 17, 2015 in Investing In Property

It’s easy to become excited about a property you have seen and know you can afford, but what many buyHIDDEN COSTers, particularly first time buyers, forget is that the advertised price isn’t the only cost involved in buying property.

Transfer duty (a form of tax that applies to property priced over R750 000) has to be paid before the transfer can be completed. Likewise, there are attorneys’ costs and bond charges which all form part of the ‘extras’ that need to be taken into account and which have to be settled before moving in.

Unfortunately these charges are often left out of the financial planning equation and it’s only when the deal is done and signed that the buyer realises that he has to come up with this additional sum, which is determined by the price of the home.

This is particularly true of those buying in lower income and lower price brackets.

A buyer was recently dismayed to find that the conveyancing and transfer fees on a property costing R800 000 amounted to R18 000 and the bond costs involved came to R14 000 – the buyer had been completely unaware that there would be any upfront costs in registering his bond.

Although many estate agencies have made repeated calls for the percentage paid on transfer fees to be lowered, this is unlikely to happen any time soon, if at all. Simply put, the government stands to lose billions and is definitely not going to overlook this very healthy source of revenue.

Buyers need to educate themselves about the relevant costs, including the deposit required, before they sign an offer to purchase. They also need to remember to factor in the additional costs before making an offer. Ideally, savings should be used for this purpose, but as has often been stated, South Africans are not best known for their thrifty ways and may have to look at other avenues such as bridging finance in order for the deal to go through.

There are those of course who will look at property and think that it’s cheaper to rent and while this may be true in the short term, the benefits of owning your own home cannot be over stated. Firstly owning property means you have a tangible asset that will continue to grow in value. Secondly, landlords put up rents every year and while homeowners may have to fork out a little more when the interest rate increases, this doesn’t compare to the annual increase of around seven to 10 percent that landlords traditionally introduce.

It also pays to remember that these costs only really hurt the first time you buy a home. Thereafter, the profits made from the sale of your current home will generally cover all the associated costs linked to buying a subsequent property.

Source: http://www.privateproperty.co.za

Tax benefits of home ownership

June 17, 2015 in Investing In Property

Tax BenefitThose home owners who buy a property with the idea of writing off expenses to reduce their personal tax, should be very clear on what the law states.

They should also have clarity on current legislative and administrative changes that impact the SA property industry.  If you own and live in a residential home, there are no tax benefits. Before you invest in a property with the idea of benefiting from any costs, consult a tax consultant, your auditor, wealth managers/companies, or visit your local SARS office to get their expertise first hand.

We are all responsible for our own finances, and we need to be clear on and fully understand what we are investing our hard-earned money in. Also, you need to know if this would be a short-term or long-term investment that you are planning. An investment in property is possibly the largest investment you will ever make.

Tax benefits on home ownership expenses apply specifically to second homes bought for investment and the buy-to-let market.

According to Di Seccombe, National Head of Tax Training at audit and advisory firm Mazars, “With increased rental demand stimulating growth in the ‘buy-to-let’ market, expenses claimed for repairs and maintenance will be scrutinised by SARS. Expenses incurred in respect of repairs have to relate to trade assets that are damaged or have deteriorated.  Expenses incurred replacing assets that are serviceable for purely aesthetic reasons will not qualify for a tax deduction. The cost of improvements, reconstructions or additions to a property cannot be deducted as these expenses are of a capital nature. Neither will a deduction be allowed for repairs, if you repair a property which was previously let and which you now want to occupy or sell. You have to make the repairs whilst your property is being let.”

Also worth noting, she says, is that there is a fine line of distinction between repairs and maintenance on the one hand, and improvement and reconstruction on the other. Each case is assessed on its’ own merits.

On the SARS website,www.sars.gov.za the benefits of tax on rental income is unpacked in an easy and understandable format.

If an individual rents out a property and gets a rental income, it will be taxed.  Rental of residential accommodation includes:

  • holiday homes
  • bed-and-breakfast establishments
  • guesthouses
  • sub-renting part of your house e.g. a room or a garden flat
  • dwelling houses
  • similar residential dwellings

The rental income you get should be added to any other taxable income you may have.  A refundable deposit paid by a tenant is not taxable provided it is kept separately in a trust account and is not used by you but if it is forfeited by the tenant then it’s seen as taxable income.

The taxable amount (rental income) may be reduced as you may incur expenses during the period that the property was let. Only expenses incurred in the production of that rental income can be claimed. Any capital and/or private expenses won’t be allowed as a deduction.

Which expenses are allowed?

Expenses that may be deducted from taxable income include:

  • rates and taxes
  • bond interest
  • advertisements
  • collection fees of estate agents managing the property
  • insurance (only homeowners not household contents)
  • garden services
  • repairs in respect of the area let and
  • security and property levies

Which expenses are not allowed?           

Maintenance and repairs should be noted as specific costs and should not be confused with improvement costs. The latter is a capital expense that would be included in the base cost of the property, to effectively reduce the capital gain (or loss) on the disposal of the property, for capital gains tax purposes.

When it comes to VAT expense claims, the supply of a “dwelling” is an exempt supply for VAT purposes, and you can’t deduct VAT incurred on its expenses.

What if the expenses exceed your rental income?

Should the expenses exceed the rental income, the loss should be available to be off-set against other income earned by the homeowner, provided that losses are not “ring-fenced” in terms of prevailing anti-avoidance provisions. For more information, see the SARS Guide on ring-fencing of assessed losses arising from trade conducted by individuals.

The homeowner must effectively be able to satisfy SARS that he is carrying on a bona fide trade through the rental of his property.

Emphasises is placed on the need to get expert advice from a professional tax consultant before making any property purchase with the idea of benefiting from being able to deduct some taxable expenses.

SARS will not be lenient if you try and avoid paying your taxes due on income from second-homes or rental properties, or claim expenses which are not allowed.

Source: www.propertytribe.co.za