Holiday Home Investments
Rent or Buy Property
Owning your own beach home in South Africa as a holiday home investment has many advantages over renting.
Owning your own beach home involves a long-term investment in the local residential property market.
Over the years owning a holiday home investment has yielded competitive investment returns but of course, one must be prepared, both emotionally and financially, to ride out the low yield-times.
Tax Rule of Thumb.
Selling beach home has many hidden costs that may erode the gross profits such as capital gains tax.
The fundamental principle of South African taxation is that expenses may generally only be deducted from income used to produce the income or the gain. If you let out your holiday beach house, you may be entitled to deduct all the associated costs from the income earned. Of course, you are required to disclose your rental income.
If you renovate your own holiday home, you may be entitled to deduct the costs associated with the capital gain. An obvious advantage is that a well chosen beach location could yield high profits, while at the same time providing holidays for a family that could be relatively cheap because of the potential to accommodate the whole family.
Syndicated buy or investment is probably best balanced taking into account the seasonal requirements of the partners.
For example, the needs of a retired couple who prefer to get away to the coast during the winter and a family with children who enjoy the summer holiday crowds.
We will be starting a 5 part article on the administration of Deceased Estates.
Understanding what is expected for the finalization of a deceased estate can help you understand the tax implications.
- The Reporting Process;
- The Forms to be Completed;
- Collecting the debts and selling off assets;
- Paying the creditors
- Income Tax
- Capital Gains Tax
- Estate Duty
- the Masters Fees
- The Accounts.
A Solution is a Process.
Ask a lawyer is not enough.
It is false economy to self-diagnose the solution to a business problem and then ask for validation of your solution. For example it is like going to the doctor and saying ‘Doc, I want to save money so I am telling you I have a cold. What would you advise?” Why bother, it’s hypothetical and worth as little as pay for it. Rather take two aspirins and come back in the morning.
- Note the symptoms;
- Analyze the process;
- Consider each part of the process and look for problems with the process;
- Get the right advice;
- Implement the advice.
- Check for symptoms.
Contact us and let us tell you more about The Process.
Need to “Systemise” your business.Contact us
Take a view of where your business is heading
Have you come to the stage in your business where you need to sit back and take a view of where your business is heading? Expand or trim staff or services?
The problem with small business analysis is that it is bound to favour the discipline that carries out the analysis. For example: Your accountant will try to make the finances more efficient. One way he or she may suggest is to cut costs.
Financial discipline is vital.
A conventional lawyer will, amongst other things, try to improve your debt collections and contractual relationships.
An operations analyst will be able not take the legalities into account and may not have a sufficiently strong accounting and tax background to consider those aspects. Small businesses usually cannot afford all the services that are necessary to find their weaknesses and make viable recommendations.
A very important factor is that owners and managers are usually very reluctant to look in the mirror and consider to what extent their own skills could do with some improvement. I believe one needs to start a program that goes through the various areas.
To have adequate resources and is not enough if you cannot sell them for profit. To have you sales staff selling product and services that you cannot deliver is as bad. The quality of services and product is vital. Competition is ruthless with businesses doing anything they can just to stay in business.
Send us your queries and take advantage of a free assessment of your question. In this free assessment we will give you an idea of where we believe you should start.
The carpenter’s advice is still the best:
Measure twice. Cut once!
Take advice before you move. It’s cheaper in the long run and it’s more sustainable and constructive.
There are some very clear signs and symptoms when a business starts to destabilise.
Business recovery is divided into these stages:
- Management recognises the need to take advice on the performance of the business in it’s sector;
- If management fails, business rescue proceedings can be initiated;
- If business rescue fails, the company could be liquidated.
It is important to recognise the symptoms at the first stage.
Shares in a company under business rescue.
The question was raised by Professor Marius Pretorius as to whether Business Rescue Practitioner (BRP) should be permitted to buy shares in a company during in respect of which is acting as a business rescue practitioner. BR Portal
The views seem to be that the BRP should not be directly interested in the company.
One of the famous business turnaround specialists was Albert John Dunlap in the USA.
According to Wikipaedia “Albert John Dunlap is a retired corporate executive. He was best known as a turnaround specialist and downsizer. The ruthless methods he employed to streamline ailing companies, most notably Scott Paper, won him the nicknames “Chainsaw Al” and “Rambo in Pinstripes”. However, his reputation was ruined after he engineered a massive accounting scandal at Sunbeam-Oster.
Dunlap even has a movie about him according to Wikipaedia – “A documentary film was made about Dunlap in 1998 called Cutting to the Core—Albert J. Dunlap“
It strengthens my view that the remedies for companies in distress are the following:
- A turnaround by a business turnaround consultant who will attempt to put the company back on a profitable path. I guess that the success of a company as far as turnaround is judged is that the shareholders shares improve in value, but the tests for “success” could vary.
- The business rescue procedure is a completely different business solution that goes way beyond the shareholders’ interests. It also involves stakeholders such as the ficus, the employees, the creditors, the shareholders, almost in that order.
- If business rescue proceedings succeed, that may nevertheless be a short term solution that will stabilise the company, but require the company to hire the services of a turnaround specialist. In fact I would say that undertaking to appoint a turnaround specialist would go a long way to securing confidence in the long term survival of the company.
- If business rescue proceedings fail then the company will probably go into liquidation and either its business is sold or it is asset-stripped.
A possibility always exists at any stage for a compromise or an arrangement to be proposed with stakeholders. A management buy-out may well be an option.
My post on BR Portal was this:
“I think a BRP would have a conflict of interests if he or she accepted shares in part payment for a fee for these reasons:
- The BRP’s interest and focus is on whether the business is recoverable.His or her remuneration must be a motivation to achieve that objective as quickly and efficiently as possible.
- Shares are a long term investment. Considering other forms of remuneration such a share of profits or savings on staff reductions for example help to expose the problem.
- If a BRP also turned out to be a skilled turnaround consultant then perhaps a long term arrangement could be made when the business recovers.
Customer Relations – Supply Chain Management.
The following questions have been asked of us. Since the answers are of general interest we have posted them as a blog:. We assume that the company has one director and one shareholder.
Question 1: What information should a new customer require from a supplier about the company?
A customer will probably want to know that your company, as the supplier, is a legally registered company and whether you are VAT registered. Under the new Companies Act 2008 a Registration Certificate (form CoR 14.3) will have been issued. Under the old Companies Act it would be a Certificate of Incorporation.
Question 2 : Would the customer be entitled to see my share (securities) certificate?
I cannot think why a customer would want a share (securities) certificate. Imagine if the Standard Bank customers wanted to see all the shareholders’ share certificates! It would take 6 months to make a deposit. You should still have a share (securities) certificate.which is a certificate issued by the director of the company to prove how many shares the shareholder has. In your case you are the sole shareholder and sole director and you will issue your own certificate. BUT it is not as simple as that. Read on. Your shares would either have been issued to you automatically when the company was formed or transferred to you if you bought them. These records are kept in a Securities Register and of course it must be accurate and it must balance. It is illegal to just sign certificates, and it there is no point in taking a short cut. Its is as easy to do it right. You should have the following:
- Company Registration Certificate.
- VAT registration number if you are VAT registered.
- Standard Terms and Conditions of Trading. (Often called T&C or STC) – You can make alterations to your T&C depending on your relationship with the customer. A valid sale to your customer is ALWAYS a legal agreement. If you do not put the agreement in writing then it is automatically an oral agreement, (unwritten). You will have to live with a hand-shake and the possible misunderstandings that go with hand-shakes and “friendly” arrangements. The worst problems are usually about the terms of payment and the specifications of what was ordered.
- Legal invoices and company documents. Your documents must comply with the tax and company laws or you may not get the VAT deduction and you may not be protected from personal liability.
For the Company
- Company Registration Certificate –
- A PAIA Manual – It is not as involved as it sounds. (Promotion of Access to Information Act)
- A members’ and directors’ register – Section 26 of the Companies Act 2008
- A share certificate/s and maybe share (securities) transfer forms.
- A minute book.
- Possibly a resolution signed by you (as the sole member of the board of directors), but again it depends on the history of the company.
If your company was formed under the old Companies Act, you will need to convert the shares to no par value shares. But bear in mind that once you comply with the laws you will have the comfort that the laws will protect you. The best person to deal with the supply chain management in regard to the legalities is an attorney. DO NOT copy agreements from the internet. We have seen large companies copy American T&C’s off the web. They don’t apply in South Africa. Don’t waste your time and don’t take a chance. DO NOT have agreements drawn up by a person who does not have experience in Court. A Court is the only place you will be able to enforce your rights. It is NOT just a bunch of words for show.
Request the verification of online shops. Scam awareness.
Free website verification check.
Contact us with a website address and let us give you a free preliminary scam awareness website check.
The basic service offered is in the interests of a safer website shopping platform for all.
Send us information about scam awareness.
A possible security issue with foreign online shops.
- You purchase goods on a foreign website.
- You pay for the goods by credit card.
- The seller website acknowledges your payment.
- Then the seller website emails you to reject the transaction and undertakes to refund your money.
- The seller website banks your payment request with your bank, but does not refund your money.
- The bank will reverse the transaction if you advise them;
- If you have consented to the payment, the bank will not refuse payment to the seller, if the supplier banks your request, despite their undertaking to refund;
- You will lose the money;
- You be left to deal with the supplier according to the laws of that country.
At this stage we cannot make any recommendations other than not to shop overseas in countries where there is little support for foreign fraud claims except with well established suppliers.
From Anon – (with permission)
“Hi there. I have a small business. I was made an offer for my business and I thought it was time to retire and I was selling.
I wrote my own contract. I took pieced from the best I could find on the internet. It is pretty good, I think I covered everything very well.
The buyer has paid the deposit and moved in and he quite busy but he has missed the first payment because he says the business has not made enough to pay me and he says he must pay the creditor first.
Our deal is black and white so I am not worried.
I know this is wrong and he will see that it is really a good business. Is there anything I can do now? Just in case.
Please send me you free case.
Before I publish, please see your private response.