Purchasing a CBD flat

L

LouisJeezy

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Hey guys,

I was hoping to reach out for some advice from you kind folk. I have been made aware through a friend who works as a rental agent of the tax benefits of purchasing flats within the Durban CBD. There is a drive by the government to get people investing money back into these areas. In return you qualify for a rebate on your personal tax return, company or trust.

You benefit from a depreciation allowance on your property value calculated at 30% of the purchase price over a 5 year period. What this translates to is a non-taxable earnings inclusion in your tax return of 90k for every 300k property.

This all seems quite attractive to me. Getting my foot into the property game and purchasing a small 300-350k 1 bed 1 bath flat. If you were to put a deposit down of around 150k, you could be sitting with a small flat that isn't costing you too much each month and could be paid off within 5 years.

What exactly am I missing here ? Does anyone own these types of units within these zones ? What are your challenges as landlords ?

Thanks for your time!
 
So you have any links to this sounds very interesting tbh.
 
LouisJeezy said:
Hey guys,

I was hoping to reach out for some advice from you kind folk. I have been made aware through a friend who works as a rental agent of the tax benefits of purchasing flats within the Durban CBD. There is a drive by the government to get people investing money back into these areas. In return you qualify for a rebate on your personal tax return, company or trust.

You benefit from a depreciation allowance on your property value calculated at 30% of the purchase price over a 5 year period. What this translates to is a non-taxable earnings inclusion in your tax return of 90k for every 300k property.

This all seems quite attractive to me. Getting my foot into the property game and purchasing a small 300-350k 1 bed 1 bath flat. If you were to put a deposit down of around 150k, you could be sitting with a small flat that isn't costing you too much each month and could be paid off within 5 years.

What exactly am I missing here ? Does anyone own these types of units within these zones ? What are your challenges as landlords ?

Thanks for your time!
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I think your friend may be wrong? Tax rebates or allowances are not provincial based.

Edit: and there are certainly no depreciation rates on personal property.
 
Thor187 said:
So you have any links to this sounds very interesting tbh.
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Yeah sure, I would happily put you in contact with my friend who made me aware of it. He actually bought one himself about 2 months ago. Pretty sure I am going to go ahead with it myself, unless I hear some absolute horror stories from people here who are doing it already.
 
depreciating allowance on a property?

how does a property depreciate?
 
Splinter said:
It's nonsense. I was trying to be polite :)
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Thanks!

Anyway, I guess I should have worded it differently. It doesn't depreciate. What you qualify for is a deduction in your tax return. Does anyone have any experience with these types of units in CBD zones ?

Do any of you guys interested want to put forward some questions or concerns and I can pick his brains about it ?
 
LouisJeezy said:
Thanks!

Anyway, I guess I should have worded it differently. It doesn't depreciate. What you qualify for is a deduction in your tax return. Does anyone have any experience with these types of units in CBD zones ?

Do any of you guys interested want to put forward some questions or concerns and I can pick his brains about it ?
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There is still no such thing. I think your friend may be referring to a S12(j) (I think) arrangement. JStrike is keen on them. It's basically about venture capital. If you rich - get a financial advisor. If not, stay away.
 
Splinter said:
There is still no such thing. I think your friend may be referring to a S12(j) (I think) arrangement. JStrike is keen on them. It's basically about venture capital. If you rich - get a financial advisor. If not, stay away.
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Okay, well I don't think he would have gone ahead and purchased a 350k apartment without it existing. I'll sit down with him this week and try learn more about it and hopefully we can all discuss it further.

Thanks
 
Splinter said:
Then you chaps need to tell us more about this. It honestly sounds very odd.
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Most definitely, this is the exact reason I posted to the forum. To educate myself and others about the possibility of what sounds like something too good to be true haha.
 
A quick google search makes it seems like it is tax relief for the developer, not the purchaser?
 
It's a tax relief for either the developer or buyer depending that certain conditions are met and that the relief has not been claimed already.



It's a bit tricky and has been extended to 2020.
 
Splinter said:
Actually, I am incorrect. Hang on a mo.
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It still seems like it is an increased tax deduction for a developer:

BUILDING REQUIREMENT

To qualify for a deduction under section 13quat, a person must have:

erected an entirely new commercial or residential building;
extended, added to or improved an existing commercial or residential building or part of such a building representing a floor area of at least 1 000 m2; or
purchased a building or part of a building directly from a developer that –
has erected, extended, added to or improved either an entire building or a part of a building representing a floor area of at least 1 000 m2;
has not previously claimed any UDZ deduction on the building or part of a building; and
in the case of the improvement of a building or part of a building, has incurred expenditure on these improvements which is equal to at least 20% of the purchase price paid by the purchaser for the building or part of the building.


So it seems you can claim a tax deduction on costs. Costs as mentioned above. Although could actually be a great tax dodge ultimately.
 
Yeah, your friend is wrong. There are no special tax deductions for people buying the flats...the tax deductions etc exist for the developers to entice them to develop the areas.
 
Hey Guys, so I haven't been able to sit down with my friend just yet. However I have spoken to another person in the office briefly who owns a handful of these units and has claimed this tax deduction. It is not only the developer who qualifies for this.

It is a very real opportunity and is currently working for other people too. It is quite difficult to sit down for more than 5 minutes with these people and get stuck into all the questions and queries you have identified. I will keep you guys posted.
 
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