The thought of investing in a foreign land may be exciting and adrenaline rushing, but often quite intimidating too.
Is this the right decision? Can I get finance? Will my investment be secure? These are some of the questions that the foreign investor finds mind boggling when faced with the task of where to put one’s money.
Quite frankly, property acquisition in South Africa is no daunting task. As in all other endeavours, however, information is power. One has to know what they are doing. The first good news is that foreigners, resident or not, can legally purchase property in South Africa and apply for a mortgage bond.
It is essential to understand the home buying process. There are a number of steps involved and contrary to what many people may believe, the first step is to see that your house is in order financially. If you are not purchasing the house cash, what can you afford and how much will the banks lend to you? This is essentially the first thing a prospective home buyer must know. This will save you and others involved in the process a lot of time and possibly heartache, further down the line. Many Financial Service Providers (FSPs) offer pre – qualification services to homebuyers. Some even go as far as giving certificates that have up to 3months validity. This is a good place to start.
Be cognizant of the fact that at the present moment all banks only finance up to 50% of a property’s price to foreign buyers not living or working in South Africa. For those living and working here some of the banks might be a bit more generous depending on each individual’s circumstances. However joint purchases are acceptable where one can look at purchasing jointly with others, including South African nationals and permanent residents.
The places to investment in are as vast as the country itself. However for non- residents, holiday resort areas and the big cities are advised. This is because, if the property is solely for rental, one wants to invest in an area where the action takes place. This offers you a high likelihood of always having tenancy at your property and a decent rental amount. Reputable estate agents are also found in these areas so you are more likely to find someone who can well manage the lease of your property in your absence.
Once you know your purchase limit in the areas of your interest, it’s time to start hunting. There are various tools that can assist one at this stage, online property portals, attending Show days and open hours. Above all else driving around the area can be highly beneficial. Get a good relationship going with an area specialist realtor and your searching days should just be but the blink of an eye.
From the moment one makes an offer on a property and the seller accepts, to the day that the property is listed into the name of the buyer is termed the registration process. This process entails several legalities that foreign buyers need to be cognisant of. If the transaction is subject to the purchaser obtaining a bond, do not fall into the trap of approaching only your own bank. They might not want to over expose themselves by carrying all your banking products or you maybe overexposed leading them to granting the loan but at a high interest rate. Use of bond originators is advised, their services are free of charge to you as the client. Using their services means they can approach different banks on your behalf and you can have the luxury of comparing quotes.
When all finance is in place, guarantees are furnished to the transfer attorney and transfer of the property begins. This can be a lengthy process taking up to 8 weeks or more. There are also several parties involved at this stage of the sale. These include Bond cancellation attorneys for cancellation of the seller’s bond, bond registration attorneys for the registration of the buyers bond.
The transfer attorneys will oversee and effect the actual transfer of the property and finally the Estate agent, seller and you the buyer and all involved at this stage. These attorneys will work simultaneously, culminating the transfer attorney lodging all required legal documents in the Deeds office for registration. Knowing the process, for the investor, is not as essential as being aware that this comes at a cost to the purchaser. All property transactions in South Africa are subject to payment of transfer duty, only those to the value of R900 000 or less ad except. Also in cases where the seller is registered for VAT then Vat is instead charged. This transfer duty paid is then remitted to the receiver of revenues SARS. Other costs that the purchaser is also responsible for and not included in the purchase price are transfer costs, for the attorneys bond costs and bank initiation fees, if the property is bonded.
Although early occupation can be arranged, it is common practise to take occupancy upon registration. This causes less complications and puts some pressure to keep the transfer process moving. It is upon registration that one becomes the legal owner of the property and thus all risk and liability passes thereto.