Articles from Property Investor Network http://www.propertyinvestornetwork.co.za Fri, 12 Mar 2010 01:44:56 +0100 FeedCreator 1.7.2 http://www.propertyinvestornetwork.co.za/images/M_images/pin-decal.png http://www.propertyinvestornetwork.co.za Articles from Property Investor Network http://www.propertyinvestornetwork.co.za/index.php?option=com_content&task=view&id=1167&Itemid=177 AUTHOR Adriana Giglioli An Italian property expert suggests crucial pointers on how to safely purchase a villa or apartment in Italy and make sure you steer clear of some common mistakes. Recent changes in the Italian tax regime have cut house-buying costs by 10-15%. Combined with the country's ceaseless attraction it means there has rarely been a more opportune time to invest in Italian property. Yet as with any house-buying process, there are commonsense guidelines to follow to ensure everything runs to plan. Here are the 10 most essential: Fri, 05 Feb 2010 07:59:18 +0100 http://www.propertyinvestornetwork.co.za/index.php?option=com_content&task=view&id=1161&Itemid=184 A very important concept to look at when investing is your cost of capital. All companies and investors need money in order to start or expand activities; this money comes at a price. Large companies usually have more complex structures, comprising of both funds generated through debt and issuing of equity instruments (such as shares or bonds). However, the small property investor is usually only worried about two facets: the original capital invested in the company and any bonds applicable to the property. This cost is therefore easy to calculate. If you have a bond against an investment property of 15% per year, the cost is 15%. PR: wait... (javascript:{}) I: wait... (javascript:{}) L: wait... (javascript:{}) LD: wait... (javascript:{}) I: wait... (javascript:{}) wait... (javascript:{}) Rank: wait... (javascript:{}) Traffic: wait... (javascript:{}) Price: wait... (javascript:{}) C: wait... (javascript:{}) Tue, 31 Mar 2009 08:29:45 +0100 http://www.propertyinvestornetwork.co.za/index.php?option=com_content&task=view&id=1158&Itemid=180 In property investing the terms described in this article are very crucial to understand because property investors need to make real profits and returns on their investments. Most people and property investors regard income as just that, income. It comes in, it’s a form of profit and it means your business is thriving. A more important thing than making money is receiving it. The timing of cash flows (the day you will receive it) is easily the most important thing in managing any business’ finances and ensuring that you continue to make profits. PR: wait... (javascript:{}) I: wait... (javascript:{}) L: wait... (javascript:{}) LD: wait... (javascript:{}) I: wait... (javascript:{}) wait... (javascript:{}) Rank: wait... (javascript:{}) Traffic: wait... (javascript:{}) Price: wait... (javascript:{}) C: wait... (javascript:{}) Tue, 31 Mar 2009 07:44:52 +0100 http://www.propertyinvestornetwork.co.za/index.php?option=com_content&task=view&id=1155&Itemid=184 By: Theo Dinculescu Many property investors are buying property and finding themselves having to sell the property in a relatively short amount of time. The question that arises at this point is will they have to pay income tax on the sale or will they have to pay CGT? The answer to this question falls under the terms “Crossing the Rubicon”. However, many investors do not understand this term nor how it works. In this article we will try to demystify this term for better understanding. What does “Crossing the Rubicon” mean; where does this term come from? Historically, this concept or expression is used when a person gives a clear sign of change in intention; once you have crossed the point of no return; the point where your intention has been clearly shown through your actions. PR: wait... (javascript:{}) I: wait... (javascript:{}) L: wait... (javascript:{}) LD: wait... (javascript:{}) I: wait... (javascript:{}) wait... (javascript:{}) Rank: wait... (javascript:{}) Traffic: wait... (javascript:{}) Price: wait... (javascript:{}) C: wait... (javascript:{}) Thu, 26 Feb 2009 09:37:10 +0100 http://www.propertyinvestornetwork.co.za/index.php?option=com_content&task=view&id=1153&Itemid=185 Compounding factors over the last two years have effectively caused residential property markets to come to a stand still. Has the market bottomed out, will international bailouts be able to overcome the credit crunch? Everyone looking to 2009 for change. But will relief come? Before delve into the issues, we would like to mention that some investors are quite happy with this situation. They've managed to double their portfolios in this market and plan on buying more. For these people the problem is just finding the right deals and getting financing. But for many investors and home owners looking to sell their properties, a breather in 2009 will be most welcome. As banks have started tightening their lending criteria, many complaints have been heard from investors in the position to buy. After all, there is no point in having bargains everywhere when there is no finance to gear with. That is why we would like to remind people that putting capital aside for such times is crucial and essential. It's what separates you from the pack and allows you to do business as usual while everyone else bunkers down. All veteran investors know that without capital there is no investing, because... Thu, 29 Jan 2009 12:12:21 +0100 http://www.propertyinvestornetwork.co.za/index.php?option=com_content&task=view&id=1152&Itemid=184 Before reading this article, make sure you have read and understood the previous articles on allowances and recoupments. Capital gains tax was introduced on 1 October 2001. This tax is levied on the disposal of any asset on or after 1 October 2001. CGT is very complex. I will be discussing the basics in this article. How do we calculate it? Before we can calculate CGT, we must first discuss the amounts that make up a CGT calculation. These amounts are: Proceeds, Base cost. Proceeds: (definition set out in schedule 8 Par 35-43) Proceeds are made up of any considerations received in exchange for the asset. This could include the discharge of a debt by the buyer on behalf of the seller, or, if assets are exchanged, the market value of the asset received. The most common one is obviously cash. Proceeds exclude any amounts which are already included in gross income in respect of that asset, such as recoupments on a sale. As you can remember, we include the recoupment in income and we are taxed on it. This avoids double taxation of amounts. Base Cost: The base cost of an asset is the original cost to the taxpayer less any amounts which were excluded from gross... Wed, 12 Nov 2008 03:29:40 +0100 http://www.propertyinvestornetwork.co.za/index.php?option=com_content&task=view&id=1151&Itemid=180 In the previous article, I spoke about the importance of cash flow and the discounting thereof. The next step is to identify the relevant cash flows. Firstly; what is a relevant cash flow? A cash flow will be relevant if it can be changed or altered by a future decision. For example; if you choose to buy a building, you will make rental income, but, you can also choose not to buy it and therefore not receive rental income. An irrelevant cash flow cannot be altered by a future decision. For example; if you own the building you will have to pay rates and taxes whether you rent it out or not, you cannot make the decision not to pay as long as you still own the building. So, where to start? Firstly, decide what your plan of action will be. What asset are you buying? What cash generating purpose will it serve? How long do you intend to keep it? Then identify the costs and the income flows related to each step. Things such as: income, rates, general expenses in the production of income, selling price at the end of its useful life and most importantly, the tax implications. The tax implications must be analysed on the sale, the income generated and the expenses. Most of these figures will have to be estimated from current market data... Tue, 11 Nov 2008 23:49:57 +0100 http://www.propertyinvestornetwork.co.za/index.php?option=com_content&task=view&id=1148&Itemid=176 In property investing and even home ownership it is very important to understand the numbers of the deals. However, that said, just one set of numbers without understanding the whole pictures usually is not useful but rather can create more confusion. The numbers calculated will mean different things to different people and for different cases. Thu, 30 Oct 2008 14:01:43 +0100 http://www.propertyinvestornetwork.co.za/index.php?option=com_content&task=view&id=1147&Itemid=176 It was brought to our attention that there are even more predictions about residential real estate going down for another 2 years or more. Can this be true? As with any prediction, it can be true as much as it can be wrong. But, in essence for real estate / property investors that have purchased correctly – this does not matter at all. Never did and probably never will. Sure any investor can buy one or two wrong properties in their portfolio that don’t make much money, but one “sour lemon” has never been the “end of days” for any real estate investor. Unless, of course there is the “but” again, and the “unless” again…. those are the only properties that the investor holds. Then this could be a big problem. So, why in essence it doesn’t matter where the market goes? Wed, 22 Oct 2008 08:16:37 +0100 http://www.propertyinvestornetwork.co.za/index.php?option=com_content&task=view&id=1145&Itemid=180 Finance is always a worrying factor when starting any business. Where will I get it? How much will it cost me? Will this severely cut my potential profits? As you may have guessed, all these questions are inter-linked. They all boil down to proper financial management. This will result in lower finance costs, higher profits and most importantly, proper investments. Before you dive into financial management, you must understand its most important element; CASH FLOW. Wed, 15 Oct 2008 15:29:45 +0100 http://www.propertyinvestornetwork.co.za/index.php?option=com_content&task=view&id=1144&Itemid=176 As a property investor you will have to face various activities that sometimes can be challenging. First you will have to find the deal that suits your needs and financial situation. Personal preference and circumstances are of high importance when buying an investment property. As we say on Property Investor Network, you should make your money when you buy, not when you sell. This is very important. The deal must be good for you at the time of purchase. As we stress, over and over again, property investing is about calculating the numbers, not about the tiles, or the nice windows. Not even about the neighborhood. Though I am sure a lot of investors and particularity emotional property investors would love to argue the neighborhood subject. Because of this, it stands to reason that one should buy as cheap as possible. Many investors ask what is cheap enough? Is R300,000 okay? Or maybe R500,000 or maybe one should go for the lowest prices in the worst places of R100,000. Fri, 22 Aug 2008 14:30:37 +0100 http://www.propertyinvestornetwork.co.za/index.php?option=com_content&task=view&id=1143&Itemid=176 Some property traders and investors choose to buy property for the purpose of renovating and then selling. This strategy can be used for both selling for profits and renting for profits . In other words, there are 2 systems to renovating a property for profits. Renovating properties is great way to generate income and some do this for a living. This type of deal is really a specific strategy and can be slightly speculative in nature if one is lacking the correct planning and fundamental considerations. In other words, you can lose your shirt doing this is, if you don’t know what you are doing. Lets then look at the fundamentals and considerations that make property investors and renovators successful in this strategy. Fri, 22 Aug 2008 14:15:54 +0100 http://www.propertyinvestornetwork.co.za/index.php?option=com_content&task=view&id=1051&Itemid=177 Often I get emails about this Guru and that Guru. I get asked questions and often asked to give my opinion about other peoples systems and so called Gurus. Here is the deal, everyone wants to know what is good and what they should get involved in, but that said there is a catch to all this and I will explain this right now in the hope of clarifying the questions about all the systems and gurus in real estate and the property investing market. If you really want to get the best out of this post or clarification you should first come to suspend your thought of “Good” and “Bad” as definition. I know, for some this may be too much to ask, but if you can do this for the next 5-minutes (which should be short enough to mange) you may understand much more from what you are reading. Usually, people who ask about Gurus and systems are at the beginning of their property investing journey and the field looks very much like an endless jungle. Tue, 29 Jul 2008 01:36:55 +0100 http://www.propertyinvestornetwork.co.za/index.php?option=com_content&task=view&id=1050&Itemid=180 In these tough times one of the most frequent questions is “What do I do if I am over exposed and can’t pay the bond/s?” Here are some practical solutions out there that others have employed: If you can’t pay the bond but the transfer has not take place yet, in other words you have bought into a development, please read this article: Property Transfer Nearing No Money to Pay the Bond (http://www.karenwheller.co.za/blogpost/property-transfer-is-nearing-and-no-money-to-pay-the-bond-now-what.html) . If you have too many properties and the bonds are killing your financial position consider selling some urgently. If you can’t sell at the price you want consider reducing your price to sell at absolute bare minimum. Tue, 29 Jul 2008 01:05:29 +0100 http://www.propertyinvestornetwork.co.za/index.php?option=com_content&task=view&id=900&Itemid=184 Before selling an asset, it is wise to consider the tax implications of the sale. Such tax implications are not only important at the time of sale but also important in considering the value of a property according to its related cash flows before you actually buy a property. A recoupment is one of these considerations. To understand recoupments you must understand what the tax base of an asset is. As you remember, we are allowed to expense a part of an asset for tax purposes every year, these are allowances. The original cost of an asset, less any allowances claimed to date is the tax base of an asset. So: if we have an asset with a cost of 220,000 and we have claimed, as a deduction from taxable income, 140,000 in allowances, to date; the tax base of the asset would be 80,000. Mon, 16 Jun 2008 16:25:00 +0100 http://www.propertyinvestornetwork.co.za/index.php?option=com_content&task=view&id=899&Itemid=184 Capital gains tax was introduced on 1 October 2001. This tax is levied on the disposal of any asset on or after 1 October 2001. C.G.T is very complex. I will be discussing the basics in this article. How do we calculate it? Before we can calculate C.G.T, we must first discuss the amounts that make up a C.G.T calculation. These amounts are: Proceeds and Base cost. Mon, 16 Jun 2008 16:18:40 +0100 http://www.propertyinvestornetwork.co.za/index.php?option=com_content&task=view&id=898&Itemid=177 Once in a while like in every industry we need to look into the future to plan our marketing and continued growth. The Real Estate agents industry should do that now. I wrote a while ago that real estate agents should start looking into the future while taking new communications and networking methods into account. In every industry once in a while there are changes that have major future affect on how we do business. I remember the days when some people refused to carry a cell phone. Look today where we are. Even a 7 year old child carries and owns a cell phone. People are even becoming phobic without their cell phones, like it is their life line. What did we ever do before cell phones? I don’t know if this is good or bad nor do I care to criticize, but what is important is that I have noticed a change in the way people are marketing property to one another; a change that has the potential to be as significant as the cell phones, if not even more. Because it connects people instantly and only people that wish to be connected to each other in this... Mon, 16 Jun 2008 16:07:13 +0100 http://www.propertyinvestornetwork.co.za/index.php?option=com_content&task=view&id=737&Itemid=176 In a joint effort to give more information to property investors around South Africa, Ardent the pioneering, free property investing community website in South Africa since 2004 and Property Investor Network have decided to come together to help property investors grow their knowledge. Both Ardent and Property Investor Network had the same vision from the start, which was based on providing a free flow of property information, exchange of ideas and a community for investors to help each other while having fun and communicating freely. This merger of the sites will provide both communities with a bigger and better place for all to benefit. “In line with my vision of free flow of information on Ardent, this merger just made sense, we are two sites doing the same thing on the community side, getting together the community just grows stronger for the benefit of all”, says John Becket founder of Ardent. Though as we know information is power, more often than not, information often comes at a very high price that is not justified or necessary. Property Investor Network has built its’ community from the pure will to help investors get started and have a place to freely ask questions and discuss issues, though it will never replace professional advise, nor should it, it does... Wed, 14 May 2008 07:27:13 +0100 http://www.propertyinvestornetwork.co.za/index.php?option=com_content&task=view&id=736&Itemid=184 In property investing just like in any business tax can get complicated. It is not really that hard, However some things can get confusing. One of the more confusing things is the difference between depreciation and an allowance. This article was written to try and bring more clarity to these two terms. Wed, 14 May 2008 06:16:51 +0100 http://www.propertyinvestornetwork.co.za/index.php?option=com_content&task=view&id=735&Itemid=184 Recently on PIN Forum there has been a discussion about “round trip financing” and the dangers related to this. If you wish to read the thread before you read this article it can be found here (component/option,com_smf/Itemid,28/topic,925.0/) . As a general summary, the problem for investors is when the start moving around money between people that are the same, or in other words connected persons and /or entities. This falls under some heavy issues discussed in that thread about “round trip financing” with no commercial substance and much more. Section 80 of the income tax act no 58 of 1962 says in detail what a tax avoidance agreement is. The act deals with sections such as lack of commercial substance and round trip financing, both of which are clearly identifiable in this cases of connected persons. In several of my articles I will be discussing special rules for connected persons. I therefore feel it is important to mention what a connected person is, for tax purposes. The act separates connected persons in relation to individuals, companies, members of partnerships and trusts. Wed, 14 May 2008 06:11:53 +0100 http://www.propertyinvestornetwork.co.za/index.php?option=com_content&task=view&id=734&Itemid=184 Section 11(h): Relief for the landlord This is a highly complicated section. The first important point to mention is that these deductions do not apply in the following two circumstances: If either the landlord or the tenant is a company and the other party owns more than 50% thereof. I.E: Party “A” is an individual (could also be a company) and it rents out a building to party “B” which is a company. If “A” owns more than 50% of “B” then any premiums or improvements made by “B” will not be exempt in any way from the gross income of “A”. Also, if “A” and “B” are both companies and a third party owns more than 50% of both of them, there will be no deductions. Wed, 14 May 2008 05:53:45 +0100 http://www.propertyinvestornetwork.co.za/index.php?option=com_content&task=view&id=733&Itemid=184 In this article we will discuss whether any amounts or “BONUSES” for the landlord are taxable. Such amounts can be split up into two categories: LEASE PREMIUMS LEASEHOLD IMPROVEMENTS The tax effect of these amounts will now be discussed in detail, from the point of view of the landlord. Wed, 14 May 2008 05:52:08 +0100 http://www.propertyinvestornetwork.co.za/index.php?option=com_content&task=view&id=732&Itemid=184 Both in property investing and letting, investors need to understand some basics about taxes. These are not complex concepts, but they are concepts that help investors better understand, from a tax perspective, the working of accounting. One of the more confusing issues, are allowances and depreciations. That is why it was our first article. This is the second article in this series. When a company spends money on expenses, these expenses are deductible for tax purposes as business expenses. So, what happens when expenditure is of a capital nature and the amount spent cannot be expensed for tax purposes? Such amounts qualify for capital allowance deductions. Wed, 14 May 2008 05:41:41 +0100 http://www.propertyinvestornetwork.co.za/index.php?option=com_content&task=view&id=572&Itemid=184 Most investors know that in South Africa, as opposed to other countries like the US, property investors cannot depreciate residential buildings. We all know that some changes have been made to allow depreciation on commercial buildings but residential buildings according to tax law doesn’t have many options. As you noticed, I said many options, there is though one option in the law that is somewhat constrictive, but which may still be a viable option for buy to let investors. That statement needs a minor correction, in this article we will be referring to a new term “develop-to-let”. Hang on a bit here and we will explain everything. We found that there is an allowance in the tax law that enables property investors to depreciate a building and before we wrote this article we went out to investigate the information and give you some examples of how you can depreciate a residential building and in what conditions. So here goes… Tue, 15 Apr 2008 10:07:24 +0100 http://www.propertyinvestornetwork.co.za/index.php?option=com_content&task=view&id=567&Itemid=176 “Tenants can expect to pay double deposits and higher rent as landlords safeguard their investments and offset higher mortgage repayments.” - FNB Home Loans property strategist John Loos. During the recent property boom, divergence between rental prices and monthly bond instalments was dramatic. Rental prices remained low and seemed never to catch-up with the growing property prices. Subsidization of bond repayments was the norm for buy to let property investors. Fri, 11 Apr 2008 15:29:41 +0100 http://www.propertyinvestornetwork.co.za/index.php?option=com_content&task=view&id=566&Itemid=185 Interest rates have now gone up 450 basis points and a further hike this year cannot be excluded from planning. Along with this, fuel, food and energy prices are set to increase. Most of this woe is outside the control of the South African Reserve Bank, but nonetheless impacts heavily on an already straining economy. Things are looking pretty rosey as the perfect storm begins to brew. Perfect for Property Investors. In this market properties are “dumped” on the market in a last minute desperate attempt by owners trying to avoid repossession. Everyone tightens their belts and their budgets, business included. Layoffs follow, costs go up and inflation is the word on everyones lips. The long speculated market downturn is undeniably here. No need to speculate, it's on the streets and creating havoc. The stage is set for the perfect storm. Fri, 11 Apr 2008 14:04:22 +0100 http://www.propertyinvestornetwork.co.za/index.php?option=com_content&task=view&id=473&Itemid=180 This is actually two questions, often asked together. We will try to answer both, as these issues are very connected in more than one way. Hence the question should really be: Should one buy if not money is available to do so and if the answer is yes, then how would one go about buying. This question has as many answers as there are individual circumstances. The truth is that many investors have purchased more property via re-financing money from existing equity. But this has to be taken into consideration with affordability as well, because re-financed money actually costs money. Banks do not lend money for free of course. Mon, 24 Mar 2008 05:57:20 +0100 http://www.propertyinvestornetwork.co.za/index.php?option=com_content&task=view&id=472&Itemid=180 This article is a short comparison for two bank products. Many people asked what is the difference between ABSA buy to let offering and Nedbank. We asked Donnie Claassen our resident Financing Expert to help us out on this one. You can contact Donnie here (component/option,com_uhp2/Itemid,143/task,viewpage/user_id,702/) with any questions or comments on this article if you need clarifications. Before starting it is important to remember that every bank creating a product has certain criteria attached to it. As you see everywhere “Terms and Conditions Apply”, this also applies to bond products. Mon, 24 Mar 2008 05:50:07 +0100 http://www.propertyinvestornetwork.co.za/index.php?option=com_content&task=view&id=387&Itemid=180 In the last few years many developments have sprung and investors bough often more than one property. Though these could have been great investments some problems have been noticed with the fact that developments take time to develop and register at the deeds office. For many economic reasons including the increases in interest rates, some investors found that their affordability has changed since the time they placed the offer to purchase and were granted the bond. They have overextended themselves, didn’t know at that time, and now don’t know what to do to save the situation. Sat, 01 Mar 2008 16:39:58 +0100 http://www.propertyinvestornetwork.co.za/index.php?option=com_content&task=view&id=386&Itemid=176 Many think it takes to be Donald Trump or Robert Kiyosaki to become successful in real estate investing. That is just not true. Granted they are some of the most famous investors, but don’t think that others are not successful. Some are widely successful, they are just not famous…. and mind you, not everyone seeks fame after success. Here is what it takes for the beginning: Sat, 01 Mar 2008 16:28:38 +0100