It is a Great Time to Buy, but don’t Overspend

Homebuyers should never jump into the market with their eyes shut, even at times like these, when the combination of low interest rates and still-low property prices is creating some wonderful purchase opportunities.

Berry Everitt, CEO of the Chas Everitt International property group, says potential buyers – and especially those entering the market for the first time – should never lose sight of their own personal and financial circumstances, or of the fact that interest rates can go up just as easily and quickly as they come down.

“The low interest rates at the moment obviously do make it much easier to qualify for a home loan, to afford the monthly bond repayments and municipal charges, and to have money left over to keep the home in good condition.

“And as I’ve said elsewhere recently, prices in many areas are still below their pre-recession levels, which at the moment means that the sooner you buy, the better deal you are likely to get for your money.”

But it is extremely important, he says, for homebuyers not to purchase more home than they actually need just because it is “going cheap”, and vital that they leave themselves lots of leeway when working out what monthly bond instalment they can afford.

“Indeed, I think that buyers should always squeeze the price and not their budgets. What I mean by that is that rather than first finding a home to buy and then stretching the household budget to the limit to get the loan and afford the repayments every month, potential buyers should first take a hard look at what instalment they would feel comfortable paying, subtract some of that amount to allow for contingencies like the interest rate going up, and only then go shopping for the best house available in their price range.”

Everitt says good rule of thumb is that a new home should not cost more than 2,5 to three times the annual income of the family.

“So if your combined annual salary is R300 000, you should be looking at homes priced at R900 000 at most in order to keep up comfortably with the bond repayments once you have paid a deposit of at least 10%.”

Potential buyers, he says, should also bear in mind that the banks do not look at home loan debt in isolation. “Since the introduction of the National Credit Act, they have also been obliged to look at your overall financial situation – including debts such as car and credit card repayments as well as your regular monthly expenses such as school fees, insurance, food and transport costs and water and electricity accounts – before granting a home loan.

“And before you rush out to buy a home, I suggest this is what you should do, too, to ensure that all your debt commitments together will be manageable, even if interest rates rise. For peace of mind in this case, I would suggest that your total monthly debt repayments, including your bond instalment, should not exceed 40 percent of your income – which means they should add up to R10 000/ month or less if your combined monthly income is R25 000.”

This article has been reprinted with the kind permission of Chas Everitt International.
Barry Davies
011 801 2500, or visit
www.chaseveritt.com
Page Link: http://www.chaseveritt.com/html/press.html

What You Must Know About Your Managing Agent

One of the biggest growth areas in the real estate industry at the moment is the management of rental property on behalf of landlords – despite the fact that buy-to-let investments now only account for about 7% of property purchases, compared with about 25% in 2004.

“The main reason is that owners as well as tenants have come under increasing financial pressure in the past two years, and simply cannot afford to risk rental defaults,” says Berry Everitt, CEO of the Chas Everitt International property group.

“Many people still own several rental properties that they bought during the boom years and are in a situation where one bad payer could jeopardise their whole portfolio.

“But the most vulnerable in this respect are homeowners who, having found themselves in financial distress but unable to sell their properties in a soft market, are renting them out to cover their bond repayments while living somewhere cheaper themselves.”

Writing in the Property Signposts newsletter, Everitt notes that while falling interest rates have steadily reduced the incidence of non-payment or part-payment among tenants since last year, this is still around 20% (one in five) in most areas and income brackets, according to the latest Rental Payment Monitor compiled by TPN.

“In addition, low inflation and rising municipal service charges are going to make it very difficult for landlords to raise rents by much next year, which means that they will have little or no cushion if a tenant does default.”

In short, he says, the need and demand for expert help in managing rental properties is set to grow even more. However, there are some important things for owners to check before entrusting the management of their properties to an agent. These include:

• Ensuring that the agent is registered with the Estate Agency Affairs Board and has a trust account for holding tenant deposits;
• Ensuring that the agent is at least working towards obtaining an NQF4 or NQF5 qualification by the end of 2011, when these will become essential for an agent to practice legally;
• Ensuring that the agent has proper systems in place to check on the creditworthiness and payment history of prospective tenants, and will also establish that they are not currently under debt review;
• Ensuring that the agent will not under any circumstances hand over keys to the property until the deposit and first month’s rent have been paid; and
• Ensuring that there is a clear, written contract detailing exactly what services the agent will provide in return for his or her management fee – and whether this is a set amount or a percentage of the rent.

This article has been reprinted with the kind permission of Chas Everitt International.
Barry Davies
011 801 2500, or visit
www.chaseveritt.com
Page Link: http://www.chaseveritt.com/html/press.html

Home Loan Help for the Self-Employed

Changing economic circumstances and new lifestyle expectations mean more and more people these days are self-employed, as business owners or as freelance specialists who work on contract for a series of clients.

But even though many of them are high earners, they often find it difficult to get home loans, thanks to the fact that most banks still regard them as higher risk borrowers than corporate or public sector employees.

However, if you are self-employed, you should not give up hope just yet, says Berry Everitt, CEO of the Chas Everitt International property group. “There are ways for entrepreneurs to improve their chances of being granted a loan, the first being to get advice from an experienced mortgage originator on what size loan to apply for and how to first resolve any credit record issues that could count against you.”

Secondly, he says, if you are self-employed you should not even think of applying for a home loan unless you have all your business and personal financial administration up to date. “Remember, applicants in ordinary employment can usually provide pay slips, and income can be further verified by contacting their employer. With self-employed applicants, there are no third parties to provide such verification so lenders have to fall back on other proofs of income – and indicators of the stability of that income.

“So before you get ready to fill out that bond application, you should assemble all the supporting documentation that is likely to be required, including your annual financial statements and tax assessments for the past three years, bank statements and a cash-flow summary for the past six months, the most recent three months’ management accounts and a copy of the lease if you rent your business premises.

“You will also need a certified copy of your ID, a letter from your accountant attesting to your monthly income and a statement of your domestic income and expenditure.”

Writing in the Property Signposts newsletter, Everitt also says you will greatly improve your chances of being granted a loan if you have cash available to pay a deposit of more than 10% of the purchase price of the property you would like to buy.

“Lenders are much more inclined to grant loans to those who demonstrate financial discipline by saving a deposit and come prepared to invest at least some money in their own properties.”

This article has been reprinted with the kind permission of Chas Everitt International.
Barry Davies
011 801 2500, or visit
www.chaseveritt.com
Page Link: http://www.chaseveritt.com/html/press.html

The Importance of Rates in the Transferring Process

” A Rates Clearance Certificate is required by law and must be lodged in the Deeds Office along with the transfer documents. As it is with SARS and the transfer duty receipt, the Rates Clearance Certificate ensures and protects the Council’s interests are secured and there are no outstanding funds that aren’t paid.  

Things You should be aware of 

• If the property is a sectional title – there will be a Levy Clearance Certificate and Rates Clearance Certificate required;
• If the property is in an estate or complex – there will be a Home Owners Certificate and a Rates Clearance Certificate required;
• If the Seller is in arrears, the Council will take longer to provide Rates Clearance Figures as they need to ensure they have taken into account all outstanding funds;
• Rates Clearance Figures can only be paid via cash or an Attorneys Trust Cheque – no other form of payment is acceptable to Council;
• A Rates Clearance Certificate is only valid for 120 days, should the transfer take longer than expected – new figures will need to be obtained;
• The Rates Clearance Figures are the final amount to be paid to settle the account before Council will issue a Clearance Certificate – the Clearance Certificate confirms that there are no amounts outstanding on the account and that the account may be cancelled;

The Seller
Is reminded to ensure they close their accounts after registration has been effected – the transferring attorney will issue them with a letter confirming the registration of the property.

The Purchaser
Is required to open their own Rates Account with Council and pay the required deposit.  

Why should the Seller maintain Bond repayments?

Should the Seller not maintain their Bond instalments during the transfer process – the process may be delayed. The transfer is complicated by the fact that the bond cancellation figures obtained by the Seller bank will not coincide with the guarantees issued. Therefore the bond cancellation attorney will not be in a position to lodge and register their transaction. A transfer cannot take place unless the bond over the property is cancelled first, thus the bond cancellation attorney will be required to request new guarantees from the bond attorneys or if it is a cash transaction from the transferring attorney (who in turn needs to obtain a guarantee from the purchase price which would be invested in the transferring attorney’s money market account).  

Furthermore, what happens if there are not enough funds available to cover the new bond cancellation figures? The transfer will not be able to proceed until such time as the debt can be secured. The Seller will need to make an alternate arrangement if their banking institution will not look at an acknowledgement of debt, for the shortfall now caused – either way this causes a huge delay on the transferring process. ”  

This article has been reprinted with the kind permission of Masilo Freimond Inc.
Tel : 011 958 0488
Fax : 086 610 0276
E-mail : info@masiloincjhb.co.za

SA will be a ‘house on show’ for next month

With the start of the Soccer World Cup now just hours away, South Africa is looking just like a house for sale about to go on show – all polished up and freshly painted and ready for visitors.

“And, if the atmosphere at the warm-up games is anything to go by, those visitors – foreign teams and tourists alike – are going to have an absolutely wonderful time as they are treated to our famous hospitality,” says Berry Everitt, CEO of the Chas Everitt International property group.

“What is more, the excitement has already spread to other parts of the world. We have just returned from our annual convention, which this year took us to France and Spain, where we witnessed the keen and growing anticipation of the event first hand.

“So there is no doubt that we will have the opportunity to show off SA to millions more people than just those who can afford to visit – rather like advertising a home for sale on the Internet.

“And as we do that, I think we should all take a moment to also reflect on how far we’ve come as a country since 1994. With all our problems and setbacks and difficulties, the fact is that we have in just 16 years become a nation that is capable of hosting the biggest event in the world, and doing it with great style and flair.”

Writing in the Property Signposts newsletter, he says that getting the country ready for its big “show day” has also shown South Africans what great things they can achieve when they commit to the greater good – “and that’s the lesson we really need to hang on to after the final whistle has blown”.

Meanwhile, he says, locals should all do their best to “take visitors and viewers around the SA ‘show house’ with the warmth and good humour and wide welcome for which we’d like to become even more famous”.

Issued by Chas Everitt International
For further information call
Berry Everitt on
011 801 2500 or visit
www.chaseveritt.com

Buying Property in South Africa

South Africa has one of the best Deeds Registries Systems in the world, which makes it very safe to purchase and sell property in this country.

The Estate Agent is involved extensively whilst choosing a property and concluding a Deed of Sale. Once you find a suitable property, the Agent will prepare an Offer to Purchase, which is open for acceptance by the Seller for a certain period of time. The Purchaser is not allowed to withdraw the offer in the stipulated period, and if the offer is accepted by the Seller, it becomes a binding Contract for the sale and purchase of the property.

One of the most important issues for the foreign buyer is the tax implications of purchasing a property in South Africa. The following will be payable on the sale and purchase of the property:

• Transfer duty payable prior to registration, which amount is calculated on the purchase price of the property;
• Property rates and taxes, payable monthly or yearly, which amount is also calculated on the purchase price of the property and a portion of which needs to be paid in advance before registration to obtain rates clearance;
• Capital Gains Tax, calculated on the capital gain or profit once the property is sold. As from 1 September 2007, the Purchaser is liable to pay withholding tax to the Receiver of Revenue on a percentage of the proceeds under certain circumstances.

The purchase of the property can be financed by obtaining a loan from a Financial Institution in South Africa, which loan will be secured by a First Mortgage Bond to be registered over the property when the property is transferred. Due to the Reserve Bank’s exchange control requirements, a foreigner can only obtain a loan for 50% of the value of the property, and not 100% like a South African citizen. If you require such a loan to be able to finance the property, a suspensive condition will be inserted in the contract making the sale of the property subject to the loan being granted. In the event that the application for the loan is unsuccessful, the contract shall expire and become null and void.

Once the contract is finalized, the Seller appoints a Conveyancing Attorney that will attend to the registration of the transfer of the property and the Mortgage Bond. The transfer process in short, involves the following steps:

• Once the suspensive condition is fulfilled and the bond registration instruction is received, the transfer documents and the Bond Documents are drawn for signature by the Seller and the Purchaser. Should you wish to leave the country during this time, it is a good idea to appoint an attorney by means of a Special Power of Attorney to sign the documents on your behalf in order to avoid the strict signature requirements in the event of the document having to be signed outside the country.
• The Bond Cancellation instruction, for the cancellation of the Seller’s Mortgage Bond registered over the property is also applied for at this stage. This instruction will contain the Title Deed of the property, which was held as security by the Financial Institution for the loan that was granted;
• Once the documents are signed and the transfer costs are paid, the Conveyance Attorney will pay the transfer duty and the property rates and taxes required in advance, in order to obtain the transfer duty receipt and the rates clearance;   
• Once the transfer duty receipt, rates clearance, and Bond Cancellation Instruction are received, the Conveyance can draft the new Title Deed in the Purchaser’s name, and the transfer, bond registration and bond cancellation can be lodged in the Deeds Office.
• The Deeds Office process takes 8 to 10 working days, where after the property is registered in the Purchaser’s name.

Steps 1 to 5 take approximately 2 months, but delays can be expected should documents need signature overseas.

As a South African citizen is only allowed to take R2, 000, 000.00 out of the country in a life time, the Conveyance attends to the endorsements of the Title Deed as ” Non Resident ” in the event of a cash transaction before it is delivered to the new Purchaser. This step is taken to expedite the transfer to the proceeds of the sale of the property off shore once the new Purchaser decides to sell the property.

This article has been reprinted with the kind permission of Dykes,Van Heerden.
Tel: (011) 279-5000
Fax: (011) 955-4799
E-mail: info@dykesvanheerden.co.za

Transfer of Property from a Company, CC or Trust into the Name of an Individual

” In the latter part of 2009, Dykes, van Heerden Inc. sent a Newsflash about the window of opportunity which would be opened in regard to the transferring of certain immovable properties from Close Corporations, Companies and Trust to individuals.

They had the pleasure of advising that SARS has now passed the necessary legislation and approved the necessary forms to enable such transfer to now take place.

Due to the large saving on Capital Gains Tax and on dividends tax and STC (secondary taxation on companies), Dykes, van Heerden Inc. strongly suggest that clients who own Close Corporations and Companies which own immovable property make use of the opportunity to transfer such properties to their individual names. In the instance of those clients who own trusts which own immovable property, consideration should also be made as to whether one should take advantage of this window of opportunity although the considerations are less strong in the case of a trust.

In the case of a Close Corporation and Company one saves paying dividends tax or STC and no Capital Gains Tax in paid in respect of the transfer which means that when Capital Gains Tax is eventually paid there will be a large saving in regards to the same. When one considers that the Capital Gains Tax payable by a Company or Close Corporation is 14% whereas the amount payable by an individual is between 0% and 10% one can see the dramatic savings which can be effected in regard to Capital Gains Tax. As dividends tax is presently 10% a further large saving can be effected by utilizing the window of opportunity.

Unfortunately the previsions relate only to certain specified instances and not to all immovable property which is owned by Companies, Close Corporations or Trusts. The following minimum requirements must be presented before such a transfer can take place:

For Companies and Close Corporations

• The transferee (the Purchaser) must personally and ordinarily have resided in the property since 11 February 2009 and have used it mainly for domestic purposes and will continue to do so until the date of registration of transfer of the property;
• The Purchaser together with his/her spouse must directly hold all the share capital of the Company or the member’s interest of the Close Corporation as from the 11th February 2009 to the date of registration of the property into the name of the Purchaser;
• The property must be less than 2 hectares in extent;

For Trusts 

• The Purchaser must personally and ordinarily have resided in the property since 11 February 2009 and have used it mainly for domestic purposes and will continue to do so until the date of registration of transfer of the property;
• The property must be less than 2 hectares in extent;
• The Purchaser is the person who deposed of that residence to the trust by way of a donation, settlement or other disposition or who financed all the expenditure relating to such Property which was actually incurred by the trust to acquire and to improve the residence.

The window of opportunity is available until 31 December 2011.

Normal transfer fees, bond cancellation fees and bond registration fees will apply and one will have to arrange with the necessary financial institution to effectively ” transfer ” the bond from the relevant entity to the natural person who takes over the property.

‘ Please note that this is meant to be a comprehensive exposition on the effects of Section 9(20) of the Transfer Duty, Act 1949 and you are strongly urged to take legal advice before making any decisions in regard to the same. ‘ ”

” In the latter part of 2009, Dykes, van Heerden Inc. sent a Newsflash about the window of opportunity which would be opened in regard to the transferring of certain immovable properties from Close Corporations, Companies and Trust to individuals.

They had the pleasure of advising that SARS has now passed the necessary legislation and approved the necessary forms to enable such transfer to now take place.

Due to the large saving on Capital Gains Tax and on dividends tax and STC (secondary taxation on companies), Dykes, van Heerden Inc. strongly suggest that clients who own Close Corporations and Companies which own immovable property make use of the opportunity to transfer such properties to their individual names. In the instance of those clients who own trusts which own immovable property, consideration should also be made as to whether one should take advantage of this window of opportunity although the considerations are less strong in the case of a trust.

In the case of a Close Corporation and Company one saves paying dividends tax or STC and no Capital Gains Tax in paid in respect of the transfer which means that when Capital Gains Tax is eventually paid there will be a large saving in regards to the same. When one considers that the Capital Gains Tax payable by a Company or Close Corporation is 14% whereas the amount payable by an individual is between 0% and 10% one can see the dramatic savings which can be effected in regard to Capital Gains Tax. As dividends tax is presently 10% a further large saving can be effected by utilizing the window of opportunity.

Unfortunately the previsions relate only to certain specified instances and not to all immovable property which is owned by Companies, Close Corporations or Trusts. The following minimum requirements must be presented before such a transfer can take place:

For Companies and Close Corporations

• The transferee (the Purchaser) must personally and ordinarily have resided in the property since 11 February 2009 and have used it mainly for domestic purposes and will continue to do so until the date of registration of transfer of the property;
• The Purchaser together with his/her spouse must directly hold all the share capital of the Company or the member’s interest of the Close Corporation as from the 11th February 2009 to the date of registration of the property into the name of the Purchaser;
• The property must be less than 2 hectares in extent;

For Trusts 

• The Purchaser must personally and ordinarily have resided in the property since 11 February 2009 and have used it mainly for domestic purposes and will continue to do so until the date of registration of transfer of the property;
• The property must be less than 2 hectares in extent;
• The Purchaser is the person who deposed of that residence to the trust by way of a donation, settlement or other disposition or who financed all the expenditure relating to such Property which was actually incurred by the trust to acquire and to improve the residence.

The window of opportunity is available until 31 December 2011.

Normal transfer fees, bond cancellation fees and bond registration fees will apply and one will have to arrange with the necessary financial institution to effectively ” transfer ” the bond from the relevant entity to the natural person who takes over the property.

‘ Please note that this is meant to be a comprehensive exposition on the effects of Section 9(20) of the Transfer Duty, Act 1949 and you are strongly urged to take legal advice before making any decisions in regard to the same. ‘ ”

This article has been reprinted with the kind pernission of Dykes,Van Heerden.
Tel: (011) 279-5000
Fax: (011) 955-4799
E-mail: info@dykesvanheerden.co.za

New licence model clicks with top agents

New licence model clicks with top agents. 

via New licence model clicks with top agents.

Chas Everitt Newsletter – April

Chas Everitt Newsletter. 

via Chas Everitt Newsletter.

How to make a profitable purchase

If you’re property wise, you’ll be looking to make more “profit” when you buy a home than when you sell it in future.

And, says Berry Everitt, CEO of the Chas Everitt International property group, the way to do this is develop an eye for homes in good areas that may not look so great at the time of purchase but have good profit potential – in other words, homes that have the “right” things wrong with them.

Writing in the Property Signposts newsletter, he says these items include the following:

* A bad paint job. You should actually consider it a plus if you find a good property that really needs painting. You can discount your offer to compensate for the painting expense and inconvenience, and, immediately the paint is dry, look forward to an increase in home value equal to three to five times the cost of the paint.

* Old or uninspiring light fixtures. Among the least expensive and most profitable home improvements are new light fixtures – and skylights to open up dark hallways, bathrooms or kitchens.

* Ratty old carpets (provided the flooring beneath is sound). Another extremely profitable home improvement you can make is to install fresh new floor coverings. Sanding and varnishing existing wooden floors is also a good option, especially if they are in keeping with the age and character of the home.

* A neglected garden. Spending even a few hundred rand on plants, lawn, and a garden clean-up often adds two to three times that expense to the market value of the home.

* One bathroom. Buying a one-bathroom home can be very profitable if a second bathroom can be added within the existing floorspace. A second bathroom usually adds at least twice its cost to the home’s value – and it makes the home more marketable.

“On the other hand, though, you should absolutely avoid buying a home that needs a new roof, a foundation repair, a major electrical or plumbing upgrade, or repairs to water or termite damage.

“And, unless you are planning to live in the home for a long time, avoid buying one that will require additions such as a family room or another bedroom to make right for you. Such upgrades rarely add as much market value as they cost, and you are better off buying a home that already has all the rooms you need, even if it is somewhat more expensive.”

Issued by Chas Everitt International
For further information call
Berry Everitt on
011 801 2500 or visit
www.chaseveritt.com