Make Your Home Loan Investments Go Further with These 5 Tips

Property is often said to be a stable and reliable asset for all types of investors as well as one that provides consistent returns over time. However, as with anything there are some pitfalls to this type of investment, which need to be managed. Here are some property buying tips for investment purposes from the head of customer delight at Nedbank Home Loans, Thozama Mochadibane.

Are You Flipping or Leasing?

If you are considering investing in property then you will first need to decide if you are wanting to own the property for long term leasing whilst realising capital value growth or if you are planning on buying, renovating and then selling for a quick profit. 

Both of these options require planning and co-ordination and will have different time demands. With leasing, it is a continuous activity that has highs and lows in activity whilst flipping is a short-term project that needs dedicated and intensive management during the brief timeline. 

What About Your Finances?

You will need to speak to your financial advisor to make sure that you can afford the property over the long-term especially if a property sits empty whilst incurring overhead costs without producing an income. 

It’s a good idea to have a cash reserve saved up in a separate account for maintenance, transfer fees and so on. 

Check Out The Area

When you are choosing a property, you will need to do extensive research in the area you are interested in as well as the property market in terms of what other properties have sold for recently in the area as well as proximity to amenities and any future developments in the area. 

You need to take into account the tenants that you are targeting and if there is an appetite to buy properties in the area. 

Get The Best Tenants You Can

The best tenants are those that pay on time, keep the property in good shape and treat neighbours well. However, it is not always that easy to find these kinds of tenants. 

When picking tenants, you should do thorough credit checks, intensive screening and ensure you have an air-tight lease agreement. You should also take the time to meet a variety of potential tenants so you can get a gut feel as to the type of tenants they are.

Keep All Documentation 

You will need to keep and maintain documentation to ensure transparency and manage expectations for everyone. You should send timely receipts to clients, review the contract on a regular basis and keep images in labelled folders. Also, having a simple maintenance schedule can help in smoothing out expenditure curves over time. 

Property investing can look desirable and it can be a guaranteed money maker, but only if it is managed properly so that it can become part of your retirement plan and not just a burden. 

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Changes to 3 New Tax Bills

On Tuesday 26thNovember, three taxation bills were passed by the National Assembly and the parts of legislation are set to go to the National Council of Provinces.

The new legislation formed part of Tito Mboweni’s budget announcement on 20thFebruary and over September, there have been several public hearings on the bills. 

Here is a quick look at some of the prominent changes in the bills. 

Rates and Monetary Amounts and Amendment of Revenue Laws Bill

Changes in rates and monetary thresholds are dealt with in this bill, for instance, increases of excise duties on tobacco and alcohol, changes to personal income tax tables and changes to the eligible income brackets that meet the criteria for the employment tax incentive. 

The Standing Committee, in its report on the bill, agreed with the National Treasury and SARS that the increase in illegitimate products was due to both SARS tax administration challenges and weak law enforcement. The Committee decided to apply more focus to the monitoring of law enforcement measures on illegal tobacco trade and SARS capacity as well as calling on the government to work quicker on taxing other tobacco products like tobacco heating products and electronic cigarettes. 

In regards to personal income tax, the bill aims to raise an extra R12.8 billion. This will be done through increasing the primary rebate, which will then have an effect on tax free rebates.  The relief from the primary rebates increase will go towards lower income groups. Also, there will be no increase in medical tax credits to assist NHI funding and to provide extra tax revenue. 

The Taxation Laws Amendment Bill

The proposals here will affect individual savings and employment tax, value added tax, business tax and the Customs and Excise Act. 

The first proposal looks at revising the tax treatment of surviving spouses’ pension. The aim here is to reduce the financial pressure when calculating taxes that retirement funds may hold back on spousal pensions. The amendment will become effective on the 1stMarch 2021. 

There is also a proposal to look at the Venture Capital Companies tax incentive scheme, the VCC, in terms of the permissible deduction for investors. In 2015, changes were made to the VCC scheme to broaden it and increase uptake, but this resulted in high net worth companies and individuals trying to reduce their taxable income by excessively investing in VCCs. 

It will also refine the Employment Incentive Scheme so that it better aligns with the National Minimum Wage Act of 2018. In 2014, this scheme was introduced as a way to reduce the cost of hiring young adults that have no work experience with a cost sharing program with the government. 

The Tax Administration Laws Amendment Bill

Technical corrections will be made in the third bill. Corrections will be made to the following acts: Customs and Excise, Income Tax, Value Added Tax and Skills Development Levies. The amendments here look at aligning time periods for refunds, dates and amounts to the Tax Administration Act.

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