1. Property Investment Opportunity
2. UDZ Tax Calculation
3. Thought for the Month
Property Investment Opportunity in Joburg City Centre
With the introduction of the Urban Development Zone (UDZ) tax incentive, several major property companies have moved into the Joburg city centre with the core focus of urban renewal. One such company is Aengus Property Holdings (APH).
Aengus Property Holdings offers a complete "turnkey" solution to the discerning property investor, in that Aengus converts previously “mothballed” commercial buildings to upmarket sectional title residential properties. Aengus goes a step further by advertising, screening and collecting rent from tenants. Thus the property investor can sit back knowing that their investment is being properly managed and maintained by Aengus Property Holdings.
The Urban Development Zone (UDZ) tax incentive is aimed at encouraging inner city development across South Africa. Any taxpaying, property owning individual or entity can claim the tax benefits of the UDZ incentive, if they fall within the UDZ boundaries.
In the past, sectional title units were not entitled to a tax deduction, however due to the increasing demand from both the private sector and municipalities it was decided to amend the act to include such units.
These amendments have been applicable since November 2005 and allow up to 30% of the purchase price as a deduction over a five year period.
Aengus have just launched the Fashion Lofts development, which is located in Fashion District of central Johannesburg. All of the apartments have been fully let, with several corporate leases in place, in addition to this, a number of the apartments have a 24 month rental guarantee in place.
With prices of the apartments starting from R 256,000; these properties offer a rental return of up to 10.9% per annum for the first two years.
If you would like to learn more about the investment opportunities currently available in central Joburg please send an email to Anthony Field-Buss.
The UDZ tax calculation is for an individual earning an annual salary of R 240,000 and who purchases a property costing R 256,266. The individual finances the property with a 100% home loan. The property provides a guaranteed monthly rental income of R 2,150. The monthly levy is R 70.40 and attracts an 8.00% management fee.
The UDZ calculation compares the net earnings of an individual purchasing a UDZ property with an individual who does not but earns exactly the same annual salary.
| Annual Amounts | |||||||||
| Total Income | R | 262,970.40 | |||||||
Annual Earnings |
|
||||||||
Net Rental Income |
(Gross Rental less 8.00% management fee and levies) | ||||||||
| Less Expenses | R | 37,158.57 | |||||||
|
|
* |
(Interest only on 100% bond) | ||||||
| Net Taxable Income before UDZ | R | 225,811.83 | |||||||
|
|
(UDZ on R 256,266.00 Unit) | |||||||
| Net Taxable Income | R | 210,435.87 | |||||||
| Comparison | |||||||||||||
| Individual earning an income | Individual earning an income
and owning a UDZ property. |
Variance |
|||||||||||
| Earnings | R |
240,000.00 |
R |
210,435.87 |
|||||||||
| Tax Payable (2009 Tax Rates) | R | 45,430.00 | R |
36,560.76 |
|||||||||
| Net Income After Tax | R | 194,570.00 | R |
189,251.07 |
R |
5,318.93 |
|||||||
| Less Capital Repayment on bond | R | - | R |
2,203.82 |
* |
||||||||
| Net Earnings | R | 194,570.00 | R |
187,047.25 |
R |
7,522.75 |
|||||||
| * Bond Repayments | |||||||||||||
| Calculations based on a 100% bond for an amount of R 256,266.00 | |||||||||||||
| Total | R | 39,362.39 | |||||||||||
| Capital Repayment | R | 2,203.82 | |||||||||||
| Interest Repayment | R | 37,158.57 | |||||||||||
| Forecasted Growth (Minimal growth of 8.00%) | |||||||||||||
| Value | Collective Growth |
Amount Paid |
Realised Profit |
||||||||||
| Year 1 | R | 276,767.28 | R |
20,501.28 |
R |
7,522.75 |
R |
12,978.53 |
|||||
| Year 2 | R | 298,908.66 | R |
42,642.66 |
R |
15,045.50 |
R |
27,597.16 |
|||||
| Year 3 | R | 322,821.36 | R |
66,555.36 |
R |
22,568.25 |
R |
43,987.11 |
|||||
| Year 4 | R | 348,647.06 | R |
92,381.06 |
R |
30,091.00 |
R |
62,290.06 |
|||||
| Year 5 | R | 376,538.83 | R |
120,272.83 |
R |
37,613.75 |
R |
82,659.08 |
|||||
| Forecasted Growth (Growth of 15.00%) | |||||||||||||
| Value | Collective Growth |
Amount Paid |
Realised Profit |
||||||||||
| Year 1 | R | 294,705.90 | R |
38,439.90 |
R |
7,522.75 |
R |
30,917.15 |
|||||
| Year 2 | R | 338,911.79 | R |
82,645.78 |
R |
15,045.50 |
R |
67,600.28 |
|||||
| Year 3 | R | 389,748.55 | R |
133,482.55 |
R |
22,568.25 |
R |
110,914.30 |
|||||
| Year 4 | R | 448,210.84 | R |
191,944.84 |
R |
30,091.00 |
R |
161,853.84 |
|||||
| Year 5 | R | 515,442.46 | R |
259,176.46 |
R |
37,613.75 |
R |
221,562.71 |
|||||
I buy when other people are selling.
- J. Paul Getty (1892 - 1976)
