A Guide to Home buying for the self-employed.

If you run your own business, you may find it trickier, rather than easier, to buy a new home. Although your business savvy shows that you’re self reliant and responsible, the lack of a guaranteed income from a single source can make banks anxious about financing a home for you.

This is not to say that getting home finance will be impossible, but it does mean that you will have to deal with more paperwork than employed applicants, and you’ll probably come under closer scrutiny from your bank.

Paperwork

Whether you are a freelancer, contract worker, sole proprietor or small business owner, you will need to present the following documents with your application:

• Comparative financials covering a trading or working period of the latest two years
• Letter from your auditor confirming personal income
• If your financials are more than six months old, you will need up-to-date signed management accounts
• Cash flow forecast for the ensuing 12 months
• personal statement of assets and liabilties
• personal and business bank statements (Absa requires the latest 12 months, the other banks require six)
• Latest IT34, which is confirmation from SARS that your tax affairs are in order
• Company, CC or Trust statutory documents
• ID documents for all the directors, members or trustees.

This is a long and daunting list, but your accountant or bookkeeper should be able to help you out with most for these forms. Depending on the complexity of your application, it may also be useful to provide a short CV, and it is imperative to have your tax affairs and finances in order and up to date.

Using the services of an expert bond originator is extremely helpful, especially to self-employed buyers. A bond originator will apply to multiple banks on your behalf and present your application in the best possible light.

Boost your chances

To increase your chances of having your home loan approved, do the same things that any prospective home buyer does to ensure their financial affairs are in order.

The first thing that a bank will do is run a credit check, so you should do one yourself, before you are actually making an offer on a property. All South Africans are entitled to run one free credit check a year.

If there are any judgements against your name, it is possible in some cases to rehabilitate your record, so get expert advice on how to do this.

However, your credit record is only a small part of your general creditworthiness, so it’s a good idea to make sure you have a proven history of managing your finances responsibly. It’s a sad truth that you cant get big credit until you’ve had small credit, so open a couple of accounts with stores and get a credit card, then make purchases and pay what you owe on time and in full every month.

Obviously, your financial records will show whether you earn enough to afford the property that you want to buy, so it’s a good idea to manage your income and expenses carefully in the months or even years leading up to buying a home. Banks like to see regular, consistent income, and also look for sufficient disposable income or monthly savings to afford your property.

It’s also useful to get pre-qualified for a home loan – which means that your income, expenditure and credit records has been checked in advance – so that you can make an offer on a property with the confidence that it is within your price range, and that your credit record is clean.

And finally, saving up for a deposit will provide an enormous boost to your bond approval chances, indicating that you are financially responsible, have the funds to put towards the house and making the home loan a less risky proposition for the bank.

For more information on home loans call Ute Kock from Ooba 041 393 7048

For more information on buying, selling or renting call Nikki Strooh 072 245 6037

 

To Trust or not to Trust

When you think of trusts, what comes to mind? For most people, the word ‘rich’ springs to the fore. After all, most of the world’s wealthy have trusts. But here’s the rub: they don’t have trusts because they are rich; they are rich because they have trusts. The right legal entity could see property investors saving millions down the line in tax, registration and legal costs.

So how does the structure work?

A trust is a simple legal entity, which is established by a founder for the safe keeping and management of the trust’s assets by the trustees. The Master of the High Court appoints the trustees, who will handle the trust for the benefit of the nominated beneficiaries.

As a property investor, a trust is a great tool if used correctly. Aside from extending a property portfolio, there are also massive savings on income tax.

Unlike people, a trust has no lifespan, so even after death, a trust will continue to generate an income and capital appreciation.

When it comes to managing risks, there are benefits in the trust structure for personal assets. If property owners place their property or portfolio of properties in a trust, they no longer belong to the property owner; in essence they belong to the trust. This provides property owners with protection in their personal capacity should any actions be taken against them such as insolvency, divorce, business volatility, disputes and other financial risks.

The Elements of a trust

In order to avoid a court declaring a mismanaged trust invalid, it should be set up and managed professionally. There are five essential elements to creating a trust.

1. The first is a grantor or trustor; this is the individual, company or legal entity that initiates the formation of the trust. They possess ownership rights of the asset and transfer it to another person to keep in trust.
2. The grantee or trustee is the legal entity that is given the mandate to manage the property by the trustor. The trustor is under agreement to administer the property as per the trustee’s wishes. If they fail to do this, it can lead to legal ramifications.
3. The trust must provide a beneficiary or beneficiaries who will benefit from the trust; the beneficiary doesn’t have to have knowledge or notification of the trust for it to be vaild.
4. For a trust to be vaild there must be a specified intention from the part of the grantor to form a trust and be bound to it. This must be presented on a document called a trust.
5. The trust document must specify the property, in the form of an estate, cash, a business, a vehicle or even a boat, that the trustor gives to the trustee to manage for their beneficiary.

With no limit in value to the assets that can be held in trust, the trust structure is one that allows investors the maximum savings, while protecting their personal assets should anything go wrong.

For more information on buying, selling or renting please contact Nikki Strooh 072 245 6037

Landlords’ Guide to Evictions

Tough economic times result in many people being unable to afford basic expenses, i.e. monthly rental. Lanlords are generally acquainted with the PIE Act which protects tenants from unlawful evictions, but often feel that tenants are protected to their detriment.

The reality however is that landlords must follow legislative procedures before evicting a tenant. What are these procedures?

Procedures to recover unpaid rental and to evict a tenant lawfully are:

1. If the tenant breaches the agreement, the provisions of the ‘breach clause’ in the lease agreement, setting out the steps to follow to cancel the agreement, are important. Note however that the Consumer Protection Act stipulates that a landlord must give a tenant at least 20 days in which to remedy the breach, prior to cancelling the lease, and provided the tenant failed to remedy the breach within this period.
2. A summons with an automatic rent interdict may be issued by a landlord claiming unpaid rental (or any other amount due in terms of the lease), interest theron, cancellation of the lease, damages for unlawful holding over and legal costs. A landlord may be able to recover all legal costs, provided the terms of the lease stipulate that the tenant will be liable for costs on an attorney and own client scale.
3. Eviction application in terms of the PIE Act (i.r.o. residential leases). This is a separate application, distinct from the aforementioned summons, launched in accordance with the prescribed legislative requirements set out in the PIE Act.

There are various technical requirements for such an application but in essence:

• Where a tenant is in breach of the agreement and accordingly in unlawful occupation, the Court will grant an eviction order on the date of the hearing.
• It is however practice in our Courts to afford a tenant at least a month to find alternative accommodation; only thereafter the Sheriff of the Court may lawfully proceed to evict the tenant if the eviction order is not complied.

It is therefore important for landlords to ensure that:

• a written lease agreement is in place prior to any tenant taking occupation;
• an attorney reviews the provisions of the lease agreement to ensure that your rights as landlord are fully protected in the event of litigation;
• the tenant pays a deposit to enable you as landlord to deduct any monies due by the tenant in terms of the lease (including rental damages).

For more information on buying, selling or renting call Nikki Strooh 072 245 6037

 

Selling Your House?Remember your electric fence compliance certificate.What

Selling Your House?

Remember your electric fence compliance certificate.

What constitutes an electric fence system?

An electric fence system is any electrified barrier consisting of one or more bare conductors erected to prevent the trespass of persons or animals, which system delivers a non-lethal charge of electrical energy to an electric fence.

An important date to remember is 1 December 2012 as any property that is sold, or otherwise changes ownership after this date, and which has an electric fence system, will require an electric fence system compliance certificate. This will include any property that was sold before 1 December 2012, but which has not been registered in the name of the purchaser.

Key points in complying with the regulations:

• Every user or lessor of an electric fence system must be in possession of a compliance certificate.
• The certificate can only be issued by a registered electric fence system installer, who is registered with the Department of Labour and in possession of a Certificate of Competence.
• The compliance certificate is transferrable from a seller to a buyer and therefore a new certificate is not required for each consequent transfer of the property, unless of course, an addition or alteration has been effected to the electric fence system since the issue of the compliance certificate.
• Although the regulations do not specify that the current user or lessor (owner or seller) is responsible for obtaining the certificate, it may be inferred that the seller will be one who must obtain (and pay for) such a certificate as the certificate is transferrable.
• If you are installing an electric fence for the first time or upgrading or altering your existing fence, make sure that your installer is a registered installer, and remember to ask for your certificate of compliance following the installation or alteration.

• Lastly, be aware that this implies no more ‘DIY’ electric fence projects.

 

For more information on buying, selling or renting contact Nikki Strooh

Buying a house? Beware of title deed restrictionsBuying

Buying a house? Beware of title deed restrictions

Buying property is an important step in a person’s life and serves as an investment for the future. However, the process of buying a house can be laborious and daunting, beginning with the search for the ideal and affordable house in the right area, making a considered offer and, on acceptance of the offer, getting a loan application approved and possibly selling you current property. There’s a plethora of factors to consider before buying a house and as a result by the time the buyers find the perfect house, they just want to seal the deal. Alas, often forgotten is the important check of the title deed for any existing restrictive conditions – a potentially disastrous mistake for buyers having ‘big’ plans for the property and not having before hand familiarised themselves with the title deed of the property.

Often residential property title deeds contain restrictive conditions, most importantly perhaps, restrictions regarding the size, number and placement of dwellings and other buildings that may be erected thereon. Simply put, these restrictive conditions limit the owner’s use and enjoyment of their own property in the sense that they often indicate a limitation or prohibition on some action by the property owner.

Some common restrictive conditions include:

• No building or other structure may be erected within the servitude area.
• No large-rooted trees may be planted within the servitude area.
• The erf is subject to servitude for transformer purposes.
• The erf is subject to servitude for municipal purposes.

To avoid being affected by these restricted conditions, before finalizing your offer, request your attorneys to obtain a copy of the title deed and consult with you to discuss any restrictive conditions therein, particularly where these conditions may impact on your future plans.

The above is not intended to discourage property buying but rather act as a warning to the general buyer to be careful when considering an offer and include in his due diligence also an investigation of the title deeds conditions (if any) of the property. Often the sale agreement also contains a waiver clause that transfers the risk of restrictive title conditions to the buyer and if the buyer’s homework has not been done properly, the buyer may be sorely disappointed when his future plans are affected by restrictive title conditions.

For more information on buying, selling or renting contact Nikki Strooh on 072 245 6037