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A Fin24 user is concerned about various issues in Zimbabwe and is considering disinvesting. He writes:
I am concerned about various things in Zimbabwe and so I am considering a disinvestment.
I read on Fin24 that there is a shortage of property to rent in SA. In one of the comments a Fin24 user said that he was able to buy a property on mortgage and has the rent cover all of the payments.
I have applied for permanent residence in SA.
So, it may make sense for me to buy a block of flats (or build a block) to rent.
I am too old to get a mortgage I presume?
How might I finance it? I really need a loan to get leverage and a good profit.
I have a good deposit and can form a company as one option. I have children in the UK, who might also be a part of it (just a thought).
My wife is aged 40 and black. She could be a part of this. I am 74 and white. We have been together since 2000 and have dated since 1993.
As for estate duty, how would I be affected at death and how if my wife dies first? I am looking to minimise taxes at all stages.
Currently I pay no income tax, because my investments all originate from the UK and are taxed there. The capital is a lot, but the yield is next to nothing.
Any information that you can drag up would be appreciated.
Tony Ketcher, managing director of Seeff Randburg, responds:
Here are some thoughts to assist in answering your question. There are many variables, which make it very difficult to answer with great precision, but these are my thoughts:
Buy and rent out property
Certainly within the context of the South African property market, there is good opportunity to earn "passive" income from rentals both in the commercial and in the residential market.
One factor to bear in mind is that returns on rental properties can vary quite significantly in different parts of the country.
There is information available, which you can research in order to establish where you ideally need to be.
In my experience, whilst the rental market is competitive for potential landlords, you will certainly not experience a vacancy rate of any consequence provided your units are competitively priced.
One can certainly make a wise investment by purchasing or building a block of flats.
Once again location vis-a-vis potential tenant demand needs to be considered.
For example: There is currently a big demand for student accommodation and therefore a facility close to a university may be worth considering.
Again, without over-analysing, I would use a financial model to establish the potential return on investment.
Operating costs in a block of flats must be assessed carefully, particularly if you are purchasing an existing block of flats.
Am I too old to obtain a mortgage?
Whether you are able to obtain a mortgage will depend very much on your personal circumstances, your overall net worth and ability to cross colateralise.
A 50% mortgage may still be obtainable, particularly if cash flow on the investment is good.
It is pertinent to mention that banks will only consider a 50% bond for non-residents, although you have mentioned that you will apply for permanent residency.
Deposit and forming a company
I would suggest that the best approach would be first to identify an asset and then speak to the lenders.
A good commercial broker, in collaboration with a lender, will be in the ideal position to provide the best advice on the appropriate approach to obtaining finance.
A good deposit always strengthens a case for a loan. It makes sense to create a company, given that you may wish to involve other family members and this structure will enable you to establish and manage costs more effectively.
Estate duty
It may be possible to minimise estate duty through a company structure, but I would advise that a tax consultant be consulted in that regard.
Minimise taxes
This is a difficult question to answer without knowing the full circumstances of your income.
I would recommend the services of a tax advisor or to obtain guidance from your accountant.
It is critical in the managing of a property investment that all costs are carefully recorded and that depreciation is also considered in costs to accurately reflect costs incurred against income earned.
South African tax laws are such that any investment which earns income in South Africa will be taxed within SA.
Again, a good accountant or tax adviser will be in a position to provide the best advice.
Best wishes with your venture.
- Fin24
Do you have a pressing financial question? Post it on our Money Clinic section and we will get an expert to answer your query.
Disclaimer: Fin24 cannot be held liable for any investment decisions made based on the advice given by independent financial service providers.
Under the ECT Act and to the fullest extent possible under the applicable law, Fin24 disclaims all responsibility or liability for any damages whatsoever resulting from the use of this site in any manner.
I am concerned about various things in Zimbabwe and so I am considering a disinvestment.
I read on Fin24 that there is a shortage of property to rent in SA. In one of the comments a Fin24 user said that he was able to buy a property on mortgage and has the rent cover all of the payments.
I have applied for permanent residence in SA.
So, it may make sense for me to buy a block of flats (or build a block) to rent.
I am too old to get a mortgage I presume?
How might I finance it? I really need a loan to get leverage and a good profit.
I have a good deposit and can form a company as one option. I have children in the UK, who might also be a part of it (just a thought).
My wife is aged 40 and black. She could be a part of this. I am 74 and white. We have been together since 2000 and have dated since 1993.
As for estate duty, how would I be affected at death and how if my wife dies first? I am looking to minimise taxes at all stages.
Currently I pay no income tax, because my investments all originate from the UK and are taxed there. The capital is a lot, but the yield is next to nothing.
Any information that you can drag up would be appreciated.
Tony Ketcher, managing director of Seeff Randburg, responds:
Here are some thoughts to assist in answering your question. There are many variables, which make it very difficult to answer with great precision, but these are my thoughts:
Buy and rent out property
Certainly within the context of the South African property market, there is good opportunity to earn "passive" income from rentals both in the commercial and in the residential market.
One factor to bear in mind is that returns on rental properties can vary quite significantly in different parts of the country.
There is information available, which you can research in order to establish where you ideally need to be.
In my experience, whilst the rental market is competitive for potential landlords, you will certainly not experience a vacancy rate of any consequence provided your units are competitively priced.
One can certainly make a wise investment by purchasing or building a block of flats.
Once again location vis-a-vis potential tenant demand needs to be considered.
For example: There is currently a big demand for student accommodation and therefore a facility close to a university may be worth considering.
Again, without over-analysing, I would use a financial model to establish the potential return on investment.
Operating costs in a block of flats must be assessed carefully, particularly if you are purchasing an existing block of flats.
Am I too old to obtain a mortgage?
Whether you are able to obtain a mortgage will depend very much on your personal circumstances, your overall net worth and ability to cross colateralise.
A 50% mortgage may still be obtainable, particularly if cash flow on the investment is good.
It is pertinent to mention that banks will only consider a 50% bond for non-residents, although you have mentioned that you will apply for permanent residency.
Deposit and forming a company
I would suggest that the best approach would be first to identify an asset and then speak to the lenders.
A good commercial broker, in collaboration with a lender, will be in the ideal position to provide the best advice on the appropriate approach to obtaining finance.
A good deposit always strengthens a case for a loan. It makes sense to create a company, given that you may wish to involve other family members and this structure will enable you to establish and manage costs more effectively.
Estate duty
It may be possible to minimise estate duty through a company structure, but I would advise that a tax consultant be consulted in that regard.
Minimise taxes
This is a difficult question to answer without knowing the full circumstances of your income.
I would recommend the services of a tax advisor or to obtain guidance from your accountant.
It is critical in the managing of a property investment that all costs are carefully recorded and that depreciation is also considered in costs to accurately reflect costs incurred against income earned.
South African tax laws are such that any investment which earns income in South Africa will be taxed within SA.
Again, a good accountant or tax adviser will be in a position to provide the best advice.
Best wishes with your venture.
- Fin24
Do you have a pressing financial question? Post it on our Money Clinic section and we will get an expert to answer your query.
Disclaimer: Fin24 cannot be held liable for any investment decisions made based on the advice given by independent financial service providers.
Under the ECT Act and to the fullest extent possible under the applicable law, Fin24 disclaims all responsibility or liability for any damages whatsoever resulting from the use of this site in any manner.
