Invest In Positive Cash Flow Deals In South Africa
Category Advice
There are numerous benefits of investing in high yielding rental property, especially in the lower end market of South Africa. We’re saying this because South Africa is fast emerging as one of the potential hubs of property investment. This is good news indeed for that segment of the market that looks into the low niche buyers. It is also a growing prospect for wooing the investors back to the central business districts so as to ensure that they stay put. Property analysts and real estate investors have predicted that the rental property market is likely to expand in the coming years.
Notwithstanding the advantages that involve high yielding rental property investments, it needs to be mentioned that once the down payment has been made and closing costs settled, the owner can use the monthly rental to make mortgage payments so as to avoid direct costs out of the pocket. With the new tax initiatives announced in the country, the overall response, especially from the property sector, has been commendable because it is a unique alternative for tackling issues of urban home depletion. Owners renovating their homes can now claim 20% tax deductions from upgrade costs from what they earn annually for up to 5 years.
Those who go for new commercial constructions or residential structures are liable to receive a write-off of 20% in the initial year, and a reduction of 5% each year for up to 16 years. This is coupled with the chances of the investment property value increasing with time. What happens is the appraisal costs raise according to the rise in the property income so that eventually, the price is higher than what you are paying for. At this point you may sell the property to acquire the profit or allow the value to escalate.
Take the case of Johannesburg: the state initiated incentives are geared to make the city appealing to the low end investors. Property economists hence predict a migration of prevalent businesses into the posh suburban haunts of the city’s north. Surmounting a decade of negative cycle in the real estate sector, it’s time to turn the market with attractive incentives such as tax relief programs targeting pockets of high yielding rental properties in the lower niche markets. A clear indication is that the government is creating cost effective options for people to put their money in the city which will consequently spur opportunities for investors.
Attractive as the lower end pocket might appear, it is however not a quick fix to the worries of the country. The silver lining is that the incentives for making investments in the high yielding rental properties will serve to compensate for the perils of real estate transactions in the interiors. While the property will be eventually paid off, the property owner will benefit from the renter’s payment. This will subsequently increase its value and potential for generating income from investment. The incentives are attractive and credible; it only remains to be seen how the lower end market of South Africa benefits from the innovative program.
Author: IMAGINE Properties