Starting a property business: Need advice

**julies** · 04-Sep-14, 08:33 PM

Currently I am invoicing my tenants using the name BLG rentals.. I guess I am using the name as a way to "tell" my tenants its a business and not a mickey mouse operation haha, and also just a way for me to keep track of everything and separate the my salary from my rental income.. I do know that sars will see it all as one thing.

**Houses4Rent** · 04-Sep-14, 09:39 PM

Ok, now the separation is a waste as its not required. I however suggest you keep doing it as it will be much easier to continue the habit once you have a separate business. I still find the separation quite challenging in my 2 man band working from home.

**Basment Dweller** · 05-Sep-14, 04:03 PM

Check this website http://www.rentalpropertyreporter.com/landlord-tips/

**Houses4Rent** · 05-Sep-14, 08:39 PM

Its all American based, totally different laws and regulations I bet. Rather stick to RSA stuff.
Thanks anyway as I am going to buy in USA soon - if all works to plan. However, I would leave such stuff to the hired mgt company.

**reuphk** · 14-Sep-14, 07:21 PM

@ Julies
You have an interesting situation.
Here is what I would have done with it (just my view)
1. Take the money out of the bond account of the townhouse and pay it on the bond of the house you are living in.
Reason: Rental property expenses are tax deductible (incl the interest on the bond), for your own property it is not.
2. Buy another property (in a Trust), using some of that cash you release to pay duties etc.
The Trust is a separate legal entity from you (sole proprietor) - too many tax benefits to explain here
3. Use the income from the granny flat to pay me a "salary"

Sorry, cannot give an opinion on starting a rental agency (that is what you mean by "manage the properties of other landlords in the future"?). Maybe do that as a Sole Proprietor (depending on your other income and tax status), or even start a Pty Ltd, but separate your own property investment portfolio from that in my view.

**julies** · 17-Sep-14, 07:43 PM

HI Reuphk

I don't understand your first point, I paid cash for the Town House last year, and this year bought my primary residence with my wife after got married?

I don't think ill start a "Rental Agency" for other land lords, I'l just concentrate on growing my own property portfolio for now.

**reuphk** · 18-Sep-14, 07:48 AM

Originally Posted by julies

HI Reuphk

I don't understand your first point, I paid cash for the Town House last year, and this year bought my primary residence with my wife after got married?

I don't think ill start a "Rental Agency" for other land lords, I'l just concentrate on growing my own property portfolio for now.

I'll explain briefly, but you should consider speaking to your accountant (or just get some advise from a CA for an hour).
SARS allows you to deduct all expenses related to a rental property from your Income Tax. Expenses includes repairs and the like, even rental losses if you have it, as well as interest as charged by the bank for a homeloan.
This is not allowed for your own house where you live.
In essence, this makes the property you live in just an expense whilst the one you rent out is an asset. (dont believe them when they tell you your own house is an asset, in accounting terms and from a tax perspective it is an expense until the day you sell it)
So, if you do not have a bond on your rental property, but you have one on your own house, it means that you cannot deduct the bond interest from your tax liability. Use the bond money (which you paid cash) from the rental and pay it off on your house you live in. This will have 2 effects. (1) reduce your interest on your own house (if not totally paid) i.e. reduce the amount of money you CANNOT claim as an expense and (2) increase the interest on your rental i.e. increase your expenses on your rental, with an amount you CAN claim from tax.
Further to this, since you are renting out your cottage, you can claim from tax any expenditures you may have including improvements if it is small amounts, from your tax as you declare the income from the cottage as rental income as well.

Hope that makes sense. It is one of the many benefits of property investments. If you are keen to build your own portfolio and invest in properties, may I suggest that you find a good course that teaches these and other financial and legal information.
May I suggest TREOC as an option. I think Coert Coetzee has quite a lot of info and value to add to especially new investors. He operates in Jhb and Cape Town if I am not mistaken. There are a few of his type of "seminars", but I would suggest that you tie into a club, and keep to South Africans (sorry, no issues with all the Canadians and US and Europeans and whoever else that come here, but they are all about selling their own "offerings" and mostly not as clued up about our specific South African tax and other considerations)

**Houses4Rent** · 18-Sep-14, 08:20 AM

I would not ever touch Treoc and rather recommend P3 for a relative beginner. Or even Hannes Dreyer.

**Basment Dweller** · 18-Sep-14, 09:32 PM

Originally Posted by Houses4Rent

I would not ever touch Treoc.

Curious to know why, what's up with Treoc?

**Houses4Rent** · 18-Sep-14, 09:37 PM

Long story and just my opinion. Call me if interested.

Just one snippet: A man who punts property and then suddenly punts gold has no credibility in my mind.
He is too full of himself too (Treoc is Coert spelt backwards). Everything is declared rubbish, except his stuff. He does some good to the masses, but I would never follow him.