Best nails york me prices

Thinking of getting a buy-to-let to boost a pension, or as an alternative to paying rent for a son or daughter at university? Liz Still looks at the pros and cons

Despite the fact that the number of rental households in SA has increased by 7% (1,5 million) over the last 11 years, if you borrow money to fund a buy-to-let right now, the maths is stacked against you..

The prime rate (the interest rate lenders charge to loan you money) is 9,75%, while the average gross yield for property investments across SA (what you earn from rental income pre-tax) is 8,6%. On the other hand, yields vary considerably within cities and across property types, and the figures above ignore the impact of capital growth (the value increase of your property).

HOW COSTS ADD UP

Deposit A 10% deposit will reduce borrowing costs. However, some buyers in selected areas are getting 100% bonds.

Conveyancing- and transfer costs According to John Birkett, there’s no transfer duty up to R750 000. Costs of registering a bond of R1 million (including transfer duty and conveyancing fees) come to around R41 562. Conveyancing fees are set according to prescribed tables (available from conveyancers and estate agents).

Insurance Most sectional-title schemes include insurance in their levies. If you’re investing in a free-hold property, add the costs of insurance to your total costs.

Agent commission An estate agent’s commission is usually about 5%, plus VAT.

Tax on rental income This is relatively high in SA compared to world standards.

You can only deduct expenses associated with a property if it generates revenue; so if your child is the tenant and doesn’t pay rent, you can’t deduct any expenses. If the property is rented out, expenses like levies, rates, utility costs, interest payments on your bond, and insurance premiums can be deducted. Rental-profits after costs are taxed at progressive rates (the higher your income, the more you pay) from 18 to 41% for the 2015/16 tax year.

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