Real Estate Investor Magazine South Africa November 2019 | Page 39

Other factors to consider:
The extent of the renovations/ upgrades you
will undertake:
“Determine the overall price of the potential renovation vs. the
return/ profit that you can expect,” Vil-joen advises. “Is there a
demand for the types of renovations/upgrades that you would
like to do? Would the total value of your property increase by
doing these upgrades? An example: would the val-ue of your
property substantially increase by installing a self-flushing
toilet in a studio apartment? Is this a priority for purchasers?”
“It is very important to agree and
stipulate the share-holdings of each
owner before acquiring the property”
The area:
“Is this a high capital growth area? Is this an area that people
want to be in? What is the crime like? What are the neighbours
like? What have properties in the area been sold for? What is the
demographic of the area and does this affect the potential sales
price? I have dealt with a landlord who purchased a property in
an up-and-coming area, however this specific street was less-
gentrified. The property was purchased with the intent to sell
it on, but the owner overcapitalized. She was unable to get her
price. Eventually, she decided to let the property and now she
is playing the waiting game until the area starts improving.”
Co-owners should discuss the following
points before acquiring a property:
What percentage of the property will be held by
which co-owner?
Are your intentions to purchase the property as an
investment property and rent it out or will one of
the co-owners be living in the property?
How will the initial deposit amount be paid? Will it
be split between the co-owners according to their
shares? If not, this should be thoroughly discussed
and agreed to (in writing) by all co-owners.
It is very important to remember that you are jointly
and severally responsible for the bond repayments
regardless of how you have split your co-ownership
and responsibilities. In es-sence, this means that
the bank can recover the full amount from either
debtor exclusively or from all of the co-owners in
proportion to their shares, whether you are paying
your portion or not.
How will the profits/losses be split should the
property be sold? If for example, you own a share of
40% of the property, will you only earn 40% of the
proceeds of the sale?
Discuss and agree on how the co-ownership will be
The reason the current owner is selling: terminated and steps to follow in the event that one
“Establish the extent of the maintenance work to be done.
Have you gone through the property’s con-dition report?
Is it structurally sound? Is the property in need of cosmetic
upgrades or is there a seri-ous problem that needs to be
considered?” co-owner wishes to sell.
How will the death of a co-owner be dealt with?
How will you handle disputes? Maybe at some point
you will want to renovate and the other co-owner
doesn’t think it’s necessary? One of you might wish
Capital Gains Tax:
“In the event that you are flipping and selling your primary
residence, you are entitled to earn up to R2 million free of
capital gains tax. But if the property being sold is not your
primary residence and/or the profit is more than R2 million, a
percentage of the profit will go towards capital gains tax.”
to give notice to an existing tenant while the other
wants to keep the tenant on – how will you settle
your differences.
Don’t forget to discuss regulating access to the
bond and the right to withdraw funds from the
bond account.
The market:
“Do a comparative market analysis to determine a realistic
market-based sales valuation before you place an offer on
a ‘fixer-upper’. You would not want to overcapitalize on a
property that is capped at a certain level.”
Once you’ve found the right property, Viljoen also
recommends that you determine whether the prop-erty you
are purchasing requires special permits from council for the
renovations. Decide whether you will monitor the renovations
yourself or employ a property manager. Then establish a list of
trusted contractors you will be happy to work with. Ask them if
there are time frames for your renovations and whether they’ll
work over the weekends to meet these. Start budgeting for
the necessary repairs, the number of months that the property
will be vacant, keep some money in the kitty to cover potential
delays in the renovation process, finding a tenant or selling the
property sold.
“If you and your co-owner/s are serious investors and ready
to sell, I would recommend employing a sales agent who is
an expert in your area,” Viljoen advises. “They will provide you
with the necessary area statistics in order to prepare you for
what can be expected. Cape Town is unique in the sense that
the areas are very diverse. You can range from lower-income
areas such as Maitland and Brooklyn to the desirable suburbs
of Bantry Bay. And the prices vary accordingly.”
SOURCE Just Property
SA Real Estate Investor Magazine NOVEMBER/DECEMBER 2019
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