Tax incentives for savvy investors

Investors still have access to powerful tax incentives, including the popular Section 13sex of the Income Tax Act No 58 of 1962.

Section 13sex enables any taxpayer who owns five or more new, residential rental units to claim up to 55% of the purchase price back from SARS via a 5% per annum depreciation allowance. The incentive kicks in as soon as the investor takes ownership of their fifth brand-new unit and can be carefully leveraged to get a portfolio cash-flow positive without paying SARS a cent.

Early investors who buy 5 units can benefit from not only these huge tax savings but also a saving of R1million off the total purchase price and guaranteed rentals for the first year. *T&C’s Apply

Newlands Peak Example:

  • Purchase five units at R1,5 million each = R7,5 million
  • Discount = R1 million (R200 000 per unit)
  • Final purchase price = R6,5 million
  • Guaranteed rental for the first 12 months = R57 500 per month 
5% of the purchase price may be used as a tax deduction (tax write-off) every year.
The amount you may write off is limited to 55% of the acquisition price of the residential units.
This works out to a tax deduction (tax write-off) of R325 000 per year for 11 years.
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The following criteria apply:
  • The taxpayer must own at least 5 residential units. A residential unit refers to a building or self-contained apartment, mainly used for residential accommodation with the exclusion of structures used for business purposes, for example, hotels.
  • All units must be situated in South Africa.
  • Residential units must be new and unused. (For example, buyers of flats that had previously been occupied would not qualify for this incentive.)
  • The units must be used solely for the purpose of trade (i.e. residential letting). This prevents housing claims for personal use.

Tax deductions

While primary residences offer few tax benefits to owners, investment properties can be an excellent tax-deductible addition to a portfolio. All expenses relating to an investment property – including bond interest, management fees, municipal rates, body corporate levies, repairs, maintenance, insurance, and more – are tax-deductible.

As an added bonus, any losses are not ring-fenced, In other words, if the expenses on your property exceed its rental income, that deficit can be offset against other taxable income. That makes it possible, with very careful balancing of expenses, to use a rental property to reduce an investor’s overall tax burden.

Investment Opportunities

Micro Apartment for R996pm

Purchased as a buy-to-let property investment
Price R1,550,000 incl. VAT
Special R1,350,000 incl. VAT

How does it work?

Purchaser puts 10% deposit down = R135 000
Purchaser secures 90% bond = R1 215 000

Monthly Costs:

Bond Repayment = R9 603
Rates & Levies = R1 393
Total Monthly Cost = R10 996
*Guaranteed Monthly Rental for 1 year = R10,000pm

Your Monthly Contribution = R996pm

Monthly Costs:

Bond Repayment = R8 782
Rates & Levies = R1 393
Total Monthly Cost = R10 175
*Guaranteed Monthly Rental for 1 year = R10,000pm

Your Monthly Contribution = R175pm

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Studio Apartment for R1406pm

Purchased as a buy-to-let property investment
Price R1,775,000 incl. VAT
Special R1,575,000 incl. VAT

How does it work?

Purchaser puts 10% deposit down = R157 500
Purchaser secures 90% bond = R1 417 500

Monthly Costs:

Bond Repayment = R11 204
Rates & Levies = R1 703
Total Monthly Cost = R12 906
*Guaranteed Monthly Rental for 1 year = R11,500pm

Your Monthly Contribution = R1 406pm

Monthly Costs:

Bond Repayment = R10 246
Rates & Levies = R1 702
Total Monthly Cost = R11 948
*Guaranteed Monthly Rental for 1 year = R11,500pm

Your Monthly Contribution = R448pm

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One-Bed Apartment for R1815pm

Purchased as a buy-to-let property investment
Price R2,200,000 incl. VAT
Special R2,000,000 incl. VAT

How does it work?

Purchaser puts 10% deposit down = R200 000
Purchaser secures 90% bond = R1 800 000

Monthly Costs:

Bond Repayment = R14 227
Rates & Levies = R2 188
Total Monthly Cost = R16 415
*Guaranteed Monthly Rental for 1 year = R14,600pm

Your Monthly Contribution = R1 815pm

Monthly Costs:

Bond Repayment = R13 010
Rates & Levies = R2 188
Total Monthly Cost = R15 199
*Guaranteed Monthly Rental for 1 year = R14,600pm

Your Monthly Contribution = R599pm

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