AFFORDABLE HOUSING
Practical Example : How it works in real life Let ’ s look at a South African example to illustrate the concept of owning a property through a company with shares held in a Holdings Trust . Imagine you purchase a property for R3 million with three units on the premises — one main house and two cottages .
• The Purchase : You buy the property through your investment company , with shares held in your Holdings Trust .
• The Setup : You live in the main house and rent out the two cottages for R8,000 each per month , generating R16,000 in rental income .
• Monthly Costs : Your bond repayment on a 30-year loan at 11.25 % interest is approximately R29,000 per month . Rates , maintenance , and other expenses add another R5,000 .
• Your Contribution : After accounting for the rental income , you only need to pay rent of R18,000 to cover the shortfall to live in the main house .
Now compare this to purchasing a single-unit home for R3 million in an upmarket area that generates no rental income . Your monthly bond repayment and costs remain at R34,000 , but you ’ re solely responsible for covering the entire amount . This approach ties up your capital without providing additional income .
By choosing the multi-let property , you gain a place to live while reducing your financial burden and building a sustainable income stream . Over time , the property appreciates , the rental income increases , and you can reinvest in more properties .
Key Takeaways
1 . The Best of Both Worlds Owning a property through a company with shares held in a Holdings Trust and renting it from the entity allows you to benefit from homeownership while keeping your financial options open .
2 . Think Strategically If you can purchase a property with multiple units , you can live in one and generate income from the others , making it a smart investment .
3 . Run the Numbers Always ensure the financials make sense . Focus on properties that deliver strong rental yields and avoid overextending yourself .
4 . Flexibility Matters Renting in premium locations or during transitional phases can provide flexibility and financial freedom .
60 REI MAGAZINE DECEMBER 2024 / JANUARY 2025