When we are young we do not dream about the twenty years that it may take to pay off a bond. We do not take into consideration factors such as capital gains tax, estate duty, upfront and ongoing costs, or which type of property ownership structure suits us the best. Funny thing is that, as adults, we still ignore these critical permutations and considerations when buying property.
Every decision we take has financial, legal and tax implications. Buying a house or other property is an emotional process in which people tend to make irrational decisions while ignoring the tax, legal and financial implications. There are many factors which weigh on the decision to purchase property.
Should you buy the property in your personal capacity, in a trust, a company, partnership or in a CC? Which of these property structures suits your unique circumstance the best? Are you purchasing the property for personal use, as an investment, or purely for speculative reasons – and what will the period of ownership be?
Every purchase option available to us has its pros and cons. There is no right or wrong option here. You need to analyse your individual circumstance and needs, and then choose the option that will benefit you the most. Your personal environment is not only governed by what you earn.
What is your current marital status and do you have plans to get married in the near future? What does your investment portfolio look like or have you not yet decided on a long-term, wealth creation strategy? Are you working for a company or running your own business. What are your insolvency risks and which steps, if any, have you taken to protect yourself against possible loss of property – if, by chance, you should be declared insolvent?
Without professional help and proper guidance, the decisions we make may come back to haunt us, leaving us in the barren desert of
financial ruin. There is no absolute right or absolute wrong property structure choice when buying a home. We must take responsibility for finding out exactly how the various taxes, costs and specific property structures will affect our personal circumstance.
It is a lot to make sense of and it can be very complicated, but help is at hand. All you need to do is ask – and that, ladies and gentlemen, is the long and the short of it.
Information provided by Powerhouse Financial Solutions 011 487 3388
Reproduced with permission from Home Front – October, 2004
