Results 1 to 9 of 9

Thread: Property as Investment

  1. #1
    Full Member
    Join Date
    Jul 2008
    Posts
    62
    Thanks
    11
    Thanked 0 Times in 0 Posts

    Lightbulb Property as Investment

    Hello,

    I'm still individual taxpayer without any business entity and I will receive fund for service rendered soon and I'm thinking about investing that amount into residential property to be let for profit over long term.

    How do I structure this for SARS purpose? Should I incorporate CC and register the property under company name? Is there any better way?

    Thanks in advance!

  2. #2
    Diamond Member wynn's Avatar
    Join Date
    Oct 2006
    Location
    east london
    Posts
    3,338
    Thanks
    548
    Thanked 624 Times in 523 Posts
    Hi anakin, you don't say where you are situated.
    I was reading an article that said bargain properties in high density areas (eg capetown tableview) are there for the taking provided you are investing for the long term!

    Apparantly there are a lot of sellers in distress and are trying to sell for what they owe the bank, they are prepared to lose any deposit and down payment they made just to get out from under the cosh of the bank.

    Also there are plots on golf estates selling for much less than the original asking price for the same reasons (no rental income though)
    "Nobody who has succeeded has not failed along the way"
    Arianna Huffington

    Read the first 10% of my books "Didymus" and "The BEAST of BIKO BRIDGE" for free
    You can also read and download 100% free my short stories "A Real Surprise" and "Pieces of Eight" at
    http://www.smashwords.com/books/view/332256

  3. #3
    Full Member
    Join Date
    Jul 2008
    Posts
    62
    Thanks
    11
    Thanked 0 Times in 0 Posts
    Hi Wynn,

    Thanks for your post. Are you suggesting that it is not a good investment? I know one property (with existing tenant contract included) and the monthly rental amount is very close to 1% of the purchase price.

    I was wondering if there is a way to invest turnover (before tax) into property?

  4. #4
    Site Caretaker Dave A's Avatar
    Join Date
    May 2006
    Location
    Durban, South Africa
    Posts
    20,979
    Thanks
    3,055
    Thanked 2,462 Times in 2,067 Posts
    Blog Entries
    12
    Quote Originally Posted by anakin View Post
    I was wondering if there is a way to invest turnover (before tax) into property?
    Aaah!

    The problem you face is:
    You can normally only claim an expense against income to reduce your tax liability if... the expense was incurred in the generation of that income.

    Also, capital expenditure is not claimable as a (deductible) expense.*

    *at least not for the kind of money involved in a property investment. There is currently a R7 000.00 threshold (with qualifications), but I'm sure not applicable in this case.
    The trouble with opportunity is it normally comes dressed up as work.

  5. Thanks given for this post:

    anakin (27-Jan-12)

  6. #5
    Full Member
    Join Date
    Jul 2008
    Posts
    62
    Thanks
    11
    Thanked 0 Times in 0 Posts
    Quite interesting article for your perusal.
    http://www.privateproperty.co.za/new...l?-.htm?id=164

    Thanks Dave, so the partial amount invested from the annual turnover will still be considered as taxable income? No matter what I do or structure as an individual taxpayer? SARS would still get more tax income from the rental income over the long run and it could end up much more than the portion payable from the turnover at the first place.

  7. #6
    Site Caretaker Dave A's Avatar
    Join Date
    May 2006
    Location
    Durban, South Africa
    Posts
    20,979
    Thanks
    3,055
    Thanked 2,462 Times in 2,067 Posts
    Blog Entries
    12
    Great link, Anakin. Pretty much covers the bases when it comes to investment vehicles

    Quote Originally Posted by anakin View Post
    SARS would still get more tax income from the rental income over the long run and it could end up much more than the portion payable from the turnover at the first place.
    I hear you - but SARS wants their slice now! And they'll take their slice of that rental income (less claimable expenses ) down the line too, thanks.

    The only way to invest and get a tax break now is to go down something like the Retirement Annuity route. But much like your argument about "bigger money to be had down the line," typically you'll end up better off down the line paying the tax now and ploughing ahead with your property investment plan.
    The trouble with opportunity is it normally comes dressed up as work.

  8. #7
    Full Member
    Join Date
    Jul 2008
    Posts
    62
    Thanks
    11
    Thanked 0 Times in 0 Posts
    I thought about RA route, but pity the RA deduction will be limited to R 200k p.a. in the next tax year (2012/03/01 - 2013/02/28), but I think the excess will be carried over to the next tax year, am I correct? I guess I better off paying tax now.

    SARS

  9. #8
    New Member
    Join Date
    Dec 2011
    Location
    Germiston
    Posts
    1
    Thanks
    0
    Thanked 0 Times in 0 Posts
    Just a few comments/thoughts about property investments:

    In the link referred to:

    Higher transfer fees are no longer at play or at 10% level - they are exactly the same as for individuals etc.

    Higher costs to set up a trust may not be ultimately true.

    The best way to invest in property is to use other people's money and time to get phenomenal growth - as long as you can contain the risk, which may be reduced in many ways. Manage the risk properly and one should be on your way!

    Trusts need to be set up and administered correctly or otherwise you may loose it all but on the other hand trusts have many other benefits. Just calculate estate costs on one's total asset (after years of growth) value and it should not be difficult to see the benefits of a trust.

    Property are one of those growth investments which could pay for itself at exceptional high growth and if done correctly, come with many benefits.

    Just my few ideas.

  10. #9
    Silver Member
    Join Date
    Jan 2012
    Location
    Johannesburg
    Posts
    305
    Thanks
    112
    Thanked 53 Times in 40 Posts
    There hasn't been property growth in 3 years, however I believe there's nothing wrong with property, at least you will always have it and will be able to rely on it on retirement or as a rental income. The way you will be taxed will be: whatever you are currently receiving as income + the rental income - property maintenance and etc - R22 800(tax free amount per annum) = the total amount to determine your taxable income, so your rental income could push your tax bracket up. Please note that I haven't included medical aid rebates, income disability contributions and so on, there could be more things into play, I'm giving you the vasic idea.

    Estate planning is also a huge part of the decision you need to make in order to prevent paying too much money in estate duties and executors fees.

    Trust is expensive to keep and besides you will pay CGT and transfer duties and so on as if you are a company, so I wouldn't suggest a trust unless you have a huge estate and there is property that your descendants will keep and it will pass down generations.

    You haven't mentioned an amount which would make a difference, as well as your income tax bracket, with those details I could give you a better advice.

    Here are a few thoughts: if the money you talking about are from a pension or provident fund you can do a section 14 transfer which means you don't pay any tax on them and the money will be invested and gain growth, the only time you will pay tax on them is when you receive the money as a monthly salary on retirement and again there are rebates and etc that come into play, again I can't really tell you without knowing what figures we are talking about.
    Of you take your money out you will pay tax according to the lump sum tax table, once you take the money out you won't pay tax on them again as there is no double taxation in SA.
    The good thing about keeping your money into preservation account is that you not paying tax on the money taken out and the money is also not taxed within the funds that you investing the money into which will also give you the power of even more compaund interest, however you can't touch the money until retirement or age 55.
    The amount of R200 000 you are talking about is the maximum tax deductable amount that a person can contribute towards a retirement annuity per year, please bear in mind that any amount on top of the R200k you will pay tax on but on retirement you won't pay tax on and again you get the benefit of 0% taxation within the fund. So in general RA is tax efficient.

    Look these are just the basics, however a proper planning needs to be done so that you can do what is best for you. If you have any questions you are welcome to PM me, I would be glad to help, that's my job and that's what I love doing.

    Good luck.
    ---There is no traffic at the extra mile---

Similar Threads

  1. Property and Value
    By tec0 in forum General Chat Forum
    Replies: 11
    Last Post: 09-Dec-09, 10:19 AM
  2. Property Guarantee
    By Jacob Zuma in forum Scam Alert Forum
    Replies: 3
    Last Post: 14-Oct-09, 12:10 PM
  3. [Article] PROPERTY INVESTMENT / Dealing with defaulting tenants
    By QUINN in forum General Business Forum
    Replies: 3
    Last Post: 13-May-09, 12:24 PM

Did you like this article? Share it with your favourite social network.

Did you like this article? Share it with your favourite social network.

Posting Permissions

  • You may not post new threads
  • You may not post replies
  • You may not post attachments
  • You may not edit your posts
  •