It is always good to invest in rental property, contrary to what people might believe. As it is, investment property offers good returns to the investor. Investing in property is a preferred option than investing in shares because investment properties generate profits though rental income, capital growth and both of these together. Now, considering the present political situation of South Africa, it must be mentioned that the government is taking on initiatives to take care of the property market, especially of the Johannesburg CBD, along with other areas such as Mafikeng, Durban, Polokwane, eThekwini, Tshwane, Ekurhuleni and Buffalo City.
The focus is on the city centres where more and more realtors are flocking in by herds, given the immense potential of the property sector out there. Moreover, laws are making it easier for the investors to penetrate within the interior cities and this is believed widely to rid the places of dirt and criminal activities. One of the benefits is that now you can generate income from your residential home by renting out your spare room or floor. Since it is not that easy to locate reliable and compatible tenants all the time for property investments, it helps if you can invest in a separate property that will generate high yielding income in the property sector.
New laws of tax relief have been furthered by the finance minister in his budget speech delivered in February. What needs to be seen now is how these plans and legislations are enacted. Tax incentives aim at the goal of putting an end to the urban rot and these have been well accepted by the property sector. If an owner seeks to refurbish their home, they are eligible for a tax reduction of 20%, whereas if the homeowner looks for constructing a new residential or commercial development, they qualify for a 20% write off in the initial year, and 5% deductions for the next 16 years.
Given the less volatile nature of investment property, it is a safe sector to invest in. With the value of the property rising in the long run, you are even eligible to receive tax deductions. The investor also has the option of including depreciation in the value of the investment property as a result of obsolescence, wear and tear in the form of tax deductions. Investing in high yielding rental property also allows you to obtain tax variations and enhance cash flows. Other than that, rental property allows you to make money from your rental income.
With the help of negative gearing, you can get higher interest on the property loan than the rental income which is derived from the property. Deductions can be obtained from tax returns by locating the difference between the rental income and interest as losses which are incurred on the investment. This way, investors can reduce their taxes. The new legislations initiated by the South African government have seen to it that the interest of the investors is now taken into consideration.