Real Estate Investment

Real estate property is not a short-term quick-fix solution to your financial problems, but a very sound investment. There is really no minimum time you will take to become financially independent, it depends on the circumstances and the size of the property investment. There are some good examples of instant property investment successes but these are not the norm and should not form the basis of your expectations.

Three of the best

Of course real estate property is not the only form of investment you can make, but I firmly believe that it is a better investment than any other investment over the same period – with two exceptions: investing in yourself (training and education) and investing in your own business. However, more than 85% of new ventures fail within three years mainly because the person starting the venture does not have the knowledge or does not apply it. Start-up capital is not enough to ensure a successful business. One needs business skills and dedication. For property investments you need a motivated seller which is prepared to sell private property at a bargain price, well below market value.

You can easily get hold of your money

One often hears people say 'My money is tied up in property' this is rubbish. If you take a mortgage bond that is worth the value of the house its value grows immediately which means there is almost immediately a surplus. Also you are paying into the mortgage bond so that excess cash is instantly available. All you need to do is call the bank. You can cash in on a house while still retaining the investment – you do not even need to put your house for sale on the market – it need not be the solution.

You can save on running costs

You need a separate team for maintenance of your real estate property. You need a plumber and an electrician and possibly a general handyman. Make a deal with them for discounted charges in exchange for early settlement (or even cash payment). Buy loyalty by paying quickly for maintenance of your real estate property. Their cash-flow matters to them, so they are usually prepared to pay for it. Costs on many other forms of investments are generally not negotiable.

It is possible to manipulate average tax at retirement

It is possible to reduce the tax one pays at retirement. Simply predict what the pay-out will be at retirement, buy a house for sale (to that value) two years ahead of retirement, ensuring that it has a negative cash-flow. This reduces your actual income over the last two years of retirement (which is the basis for calculating post-retirement tax rates). When the lump sum does payout you can use the money to settle the mortgage bond, and then peg the value and income against inflation. By using this technique it is possible to get the Receiver to subsidise your pension without it costing you a cent. Again you would probably need to get expert advice.

Plan on paying very little estate duty

If you buy a property in a trust, then your tenant pays the entire mortgage bond and it is probably paid up by the time you die. Assuming the value is R 15.0 million when you die, that is what you have to account for as personal estate duty when you die. But if it is in a trust then the real estate property belongs to the trust, not the individual. Estate duty is then not applicable. Ensure that you purchase that perfect real estate property in a trust from the outset.

You can reduce personal estate duties

You can reduce the value of your estate by loaning money against a trust. At death the estate has to pay the mortgage loan back to the trust and this is a liability which reduces the size of the estate. Also, if you have a loan-account in the trust, you can donate R30,000 per individual to the trust and thereby reduce the size of the trust – find that perfect private property for sale now.

You don't ever have to pay any Capital Gains Tax

If a real estate property is bought in a trust and is not sold within that trust in your lifetime, then there is no CGT to be paid. You need never sell property - just borrow against that property to buy another real estate property for sale (gearing).

The government subsidies mistakes

If you make a mistake, and you know how to make it, the government can subsidise over-expenditure by 40%. Any loss is subsidised by the Receiver. Bear in mind that you must get expert advice before you implement such strategies, and remember cash-flow is king. On the other hand, if you lose 40% on a unit trust there is no-one to subsidise it – make a wise decision and start looking for houses for sale – make sure you find that perfect private property for sale.

Structure your own tax incentive

Many people work towards receiving a golden handshake from their employer at retirement. Not much of the golden handshake remains after tax. Although it is possible to deduct the payments of a deferred compensation plan up to certain limits, only a portion of the ultimate payout will be tax free - the balance will be taxed according to a set formula. However, by investing in real estate property and using financial strategies within the company it is possible to structure a superior real estate property sale or 'golden handshake'.

Author: Realtors Property Sale | Sponsor: South Africa Houses for Sale