Property investment will always be a safe investment option.  The core of property investment is that you will use your rental income to pay off your bond.  There are different ways in which you can own property, such as in your personal capacity, or in the name of a company, or in a trust.  Of course there are pros and cons to each structure, but one of the main deciding factors will be on how big you intend to grow your property investment portfolio.  

So, let’s take a quick look at the basics of each structure.

Buying a property in your personal capacity:

• It can be difficult to get a number of mortgage bonds to buy several properties.

• You will pay income tax on your rental income which can be as high as 45%.

• All your individual properties have to be reported separately to SARS.

• Individuals pay an effective 18% capital gains tax on the highest 45% marginal rate.

Buying a property in a company.

• A property purchased by a company will pay tax on profits at a flat rate of 28%.

• Owning several properties within a company structure means the losses on one property can be offset against gains on others when reporting to SARS.

• Companies pay a flat 22.4% capital gains tax .

Trusts:

• Due to the recent changes in Trust law, people view trusts as uneconomical due to their high tax rates.

• However, they can still be structured effectively, often in conjunction with company structures, to maximise tax benefits and protect your legacy.   If this is the way you want to go, you should get a good accountant to advice you properly.

Apart from the structure in which you want to own property, buying the right type of property is also important.  You have to know which types of rentals are in demand, eg. houses, townhouses, flats etc.   Another factor is where in South Africa to buy.  Where are rental properties high in demand that has a shortage of available rental properties. 

So don’t just jump into property investment.  Consider all the important aspects before you buy your first investment property.  Proper planning will allow you to create a business for yourself that is largely automated and create the kind of retirement that most people only dream of. So what is the best time to start your property investment portfolio?  Today!