How I got a loan in a TRUST in South Africa
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- čas přidán 20. 01. 2024
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How I got a loan in a TRUST in South Africa
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I guess there is one benefit to having a property in your name and that is that you can rent it out to your business lets say your business uses it as an office and that way the rent is an expense. So basically the business pays the bond of the property in your personal capacity. So lower profit less taxes in other words your bond basically deducted from taxes as you are turning it into an expense since you in your personal capacity are renting it to your business. Sorry I know im wording this terribly so hope it makes sense
Hi Timo, That is correct. But a trust setup can benefit from the same idea. That's actually what im doing at the moment. Because a trust is a separate entity, it's like a different person being a landlord. At the end of the day, when you work for yourself or own a company ,there are many ways to reduce taxes that normal employees dont have. Which is great. Thanks for sharing your insight. All the best 💪🏻
@louisreynhardt if you rent from your trust, can you still claim office space % from tax?
"Its very expensive to die in South Africa 😂😂"
Facts my friend. Im always shocked to hear how much we really get taxed. Haha thanks for watching 🤣
Louis! I love your content. These are the thing you dont get taught in school unkess its thr field you want to go in. I just stumbled on this! You have an avid subscriber!
Thanks for your comment my friend, and welcome to the community. You are 100% right. These are things no one really talks about. I hope the channel can help you in your financial journey. All the best
Brother , Thank you for answering all my questions 🙏 you been guiding me through the whole process with your videos. Truly appricate it !
It's a pleasure my friend. Thanks for showing up. All the best 💪🏻
Thanks!
Thanks for watching my friend 💪🏻💪🏻
Thank you Louis for always coming through with such VALUABLE content. From all the major league property investors that give such vague advise, your content out weighs them by far. Thank you for sharing your knowledge in such great detail.🎉
Thank you very much for taking the time to leave this comment. Really makes me happy and motivates me to continue pushing content. All the best.
Irrespective of the financial position of the trust or company, the directors/trustees will have to sign surety on a bond. There is no scenario where a surety will not be taken by the bank.
Thanks for your comment. You are right. The reasoning behind the video is that you want to get to a point where your trust can financially support the property without input from an individual.
Howzit, truly informative post.
Question, can my company loan the trust the funds to purchase property?
Thanks for watching. Yes, you can. Or you can buy it within the company and your holdings trust will hold sharea of the company.
Nice video man. Quick question within a Trust model since, i kind of do not own the property, how i can i get tax breaks within this model.
There are many different ways you can reduce taxes. It depends on whether you want to withdraw the funds from the trust or keep them in circulation. Property jn general has a lot of tax benefits. Combining them with these entities can help reduce overall taxes. It's best to consult with an accountant to get an idea of your exact situation.
Just remember when opening a trust. These days there is a lot more admin required, compliance and tax requirements. If you have the know how it won't be costly.
If you make use of an outside company (accountant) it can get very expensive in itself
Thanks for sharing. You make a great point. I agree that the fees are definitely a disadvantage. Especially in the beginning part of your portfolio. But the cost paid will be worth it in the long run when you are able to build a much larger business. With that said, it's still something to consider. I also suggest using a professional because they should know better. Thanks for sharing. All the best.
@@louisreynhardt I do agree though these are very good ideas. I see it being implemented on a day to day basis in the accounting profession. I've seen a new trend that people create trusts for shareholding purposes rather than asset holding.
They create the businesses as the model for holding assets and the trust for holding the shares in the business. Reason being the companies are easier and cheaper to register in the beginning in real terms and tax wise.
Maybe worth looking into a new video idea?
Thanks for the great video . I have a question , what would the benefit be of transfering a property that we have paid up into a trust , im guessing the asset protection part but im just wondering on how one leversges a trust and the fact that you have a paid up tenanted property as leverage to increase the portfolio ?
Great question,
So tax benefits, asset protection, growth potential, and estate planning are some of the main benefits.
But not having a property in your own name means your affordability is not affected, meaning you should be able to acquire more properties when the right steps are followed.
Hi Louis, awesome video. Awesome information. Just a question. We have 2 properties atm in cpt and looking to aquire a third in our own names. When you said that, " you would propably get stuck after 1 or 2 properties and run out of affordability. "
How is that possible, both our investment properties returns a almost positive cash flow so it's not as if our affordability goes down too much - how will this affect our affordability or is the issue with the financial institutions that won't want to take on the risk?
Am I missing something?
Our plan is to start a business this year and register all new properties in the business' name - we also believe that this is definitely the way to go.
Again, awesome info. Love your channel, thanks for sharing.
Thanks for watching and for adding your comment.
So simply put when you have the properties in your own name and the properties have a shortfall, eventually you will run out of affordability. Most banks only use maximum 75% of the rental income as part of the assessment, and when it has a shortfall, it will certainly reduce the affordability. The bank also assess your affordability more carefully when its in your own name. When you use separate entities they asess it in a different way. If you are a high salary earner, you should be fine for 3 or 4 properties, but most average earners will get stuck at 2 or 3. Its just better to start correctly because when transfering them later on, there will be cost involved. You can consider shares swops, but there will still be accounting fees.
Hope this makes sense.
Hey Louis, thanks for all the wonderful content. One thing has me stuck though: when discussing reserve funds, must one already have them in place before approaching the bank or can you apply for a higher loan amount (if possible) and the excess will become your reserve funds?
Pleasure my friend. Thanks for watching.
Great question. Ideally, you should have at least some sort of reserve fund. If you dont, you can consider following the refinancing strategy and use the equity available as your reserve fund. This is a great way to use leverage to build and protect your portfolio. This is, however, a double-edged sword strategy and needs to be implemented correctly.
The ideal situation would be to at least have some reserves for your first property purchase, and from there, you can always refinance. Hope this helps 🙏🏻
Hey Louis, I'm curious if you can explain the initial set up of the trust & companies in an upcoming video. I'm not sure if I completely understand as I'm a foreigner. Does it matter if you set up the company before the trust, or does it have to be the other way around? I'd also love to get some more insight on what kind of timeline, expenses and the whole process is like for this before you even start looking at properties.
Thanks for your comment. I will look into making a more detailed video about this. But ideally, you will set up both structures at the same time. Otherwise, the company first and then the holdings trust. It also depends on the way you want to do business and what type of business you want to do. A great way to learn more about this is to schedule an appointment with an accounting firm and ask them some general advice. Most people will do this for free. Hope this helps
Questions: 1. Is it legal for a group of people registrating a "D" Family trust to take someone else's private property title deed holders "GJ" had no knowledge and did not give any permission to have their legal property registered in "D" Family trust and the legal owners "GJ" are not even part of the "D" Family trust although they are family?
2. If "D" Family trust then sell the property that's registered in the names of the owners "GJ" again without their knowledge or consent do they "GJ" the title deed holders have legal right to the money paid for the property?
3. Where can "GJ" obtain the information of the "D" Family trust and who is the members of the trust involved in this trust scam?
Hi there Louis, thanks for the advices. On my recent share purchases in a property, I received a share certificate and a debenture certificate. I find this dodge, what should be done?
We also have monies in another scheme which the directors have absconded, haven't paid any returns for the last 5 years. We have approached FSCA and they are investigating. No financial statements for last 5 years. Director's say that financial statements will only be issued in July 2024. How do we proceed with legal proceedings and how do we adress such issue?
Thank you for your comment. I would say it's best to consult with a professional in property law or consult with an accountant that has the right knowledge. This might be above most peoples knowledge base, so it's important to act on it immediately once you have the right information.
Great show. Quick one, regarding obtaining a loan from the bank under your trust or company that is not trading yet. You mentioned that you can obtain a loan and you’ll have to sign surety. Is this a normal loan or a bond? I contacted FNB regarding this few months back and I was told that banks do not give home loans to companies or trust and if I want a loan it will have to be a normal loan and as you know the interest rate is crazy compare to a home loan and I was also told that my company should show that it has been trading for more than 6 months. Can you explain that part more in detail to me please?
Thanks for watching. I would suggest speaking to a good bond originator. They will be able to help you. You can get a home loan for a trust or company. You will have to sign surety, but you will be able to get a home loan.
Hey there Louis, as always with your videos, there is something important to consider before buying property and I appreciate how you give a local and personal context to the processes involved. I appreciate the knowledge and clarification every single one of your videos provides.
I am seriously considering purchasing my first property this year with the intent of diversifying my portfolio by purchasing more as time goes on. The important aspect that I have been currently contemplating is whether to acquire a loan through a bank or trust. I am curious about the financial expenses and considerations involved with applying through an existing trust, especially in the case of requesting for finance.
Are there a large number of available trusts in readily available in South Africa or is it just better to establish one yourself? Curious to hear/read your insights
Thanks my friend. I appreciate your comment. Theres a couple if things that you might understand wrong.
I would suggest reading up on trust or watching the videos in my real estate playlist. You can also consider investing in my properry course where I cover all the necessary details
To secure your spot, simply click payhip.com/LouisReynhardt and follow the easy registration process
@louisreynhardt Thanks Louis, I think I'll continue to do research, read and understand properly so I can make the best decision. Appreciate it
@fuki9460 Great stuff, all the best my friend 💪🏻💪🏻
Louis you refer to a proper struckture, can you please elaborate what is a good structure
Generally it would be a family trust, CC and holdings trust.
Hello Louis, from what i have heard, a good way to do it is own the properties in a company and then have a trust that owns the shares to that company. I would just like to get your opinion/advice on that?
Thanks so much for sharing your insights. And yes, that's a great way to structure your portfolio. When starting out, it might be a bit expensive, especially if you own 0 property. The ideal setup would be having a family trust, CC, and the holdings trust. But this will set you back around +-R13k. However, it's definitely the right way to do it .
Lekker broe! Keep nation-building ❤ 🇿🇦
Thanks my brother 🙏🏻 💪🏻🏆🥇
So what happens if you want to sell the property while you have registered under a trust?
It can be sold like normal 💪🏻
So if I have 10 properties, where is the right place to keep them? Trust/ Company/ Personal
It will probably be a combination of a company and a holdings trust 💪🏻
I do have one question. If you have already bought an investment property in your personal capacity, are you able to transfer the ownership onto a trust or CC?
Thanks for your comment. Yes you can. You can either sell the property to the company (this will be an actual purchase agreement ) or you can do something like a shares swop. Either way there is some cost involved. It's best to consult with a professional accountant. Hope this helps
I want to start the same business but yIve been doing research before i begin. Lets say I start the same business and decide to buy 3 properties cash without taking loan from the bank and buid 12 units on each property and I manage to get tenants how much tax will I have to pay if I make over 100k will I fall under the 28% tax bracket if i registered under a company or is it 48%? Also lets say i decide to purchase another property with the profits that ive made will I be able to deduct when paying tax, can I write that off?
So unfortunately I can't answer your questions exactly.
Your tax will depend on various things like your exact income as well as your deductions. You can also make use of asset depreciation. This is where a good accountant comes I would recommend to google about property tax and get a good understanding of it. Hope this helps
Thanks, Louis, Great video has always. After how long do you think a Trust can stand on it's own and doesn't require me to sign suretyship for it anymore and doesn't require my personal income but the Trust's financial statement is sufficient for the bank? I have been signing suretyship for the past 2 years and now the Trust is solvent with 2 years of financial statement. I'm going for my 7th and 8th property but not working at the moment and hoping the Trust's financials will be enough for the bank. I have good reserves and great cash flow.
Thanks for sharing, and well done on growing your portfolio. You might be able to purchase a property on its own if the trust has enough cash flow and the property you want to buy is not too expensive. It will also help using a deposit to reduce the overall loan. This is something you can discuss with a bond originator to see if they can pre approve you in some way. Using your financial statements should prove that the trust can support the loan amount.
Hi Louis, thanks for the good videos. Question why would one have a property in a trust if the Tax on a trust is a killer 45% and around 18% for the individual according to SARS. Im trying to see what Im missing here because you will pay estate tax after passing yes but 45% Trust tax will make up for this over the years.
Great question. Just remember there are many ways to reduce your income in your trust to ultimately pay little or no taxes. Theres also ways to distribute your income or profit to individuals to pay a much lower tax rates. It all comes down to smart accounting. Besides the tax benefits there are also many other benefits like, estate planning, protection and growth opportunities. Hope it helps. Check out some of my other trust videos if you still have questions, or you can always consider my property course
To secure your spot, simply click payhip.com/LouisReynhardt and follow the easy registration process.
My house is owned by my CC which was built with my money. This way I created a loan account which the CC is paying off. Tax free in my hands.
Thank you for adding value to the comments. Great stuff. It's just a win-win situation in your own name and in the CC. 💪🏻
Hey, thanks for sharing this. I’m curious to know more. Do you have information on how one can set this up?
@@Allyblly its very easy. 2 options:
1. Go through a lawyer or accountant to create a private company (CC's no lo ger exists) with the CIPC. But the cost varies from who you get.
2. Do it youself. Become a member or open an account on CIPC and do it yourself. By far the cheapest. R175. The whole registration is digitally automated.
Hi Louis
Wat kos dit +- per jaar om n trust te hê? Alles ingesluit. Ek het gehoor dat dit redelik duur is, maar duur is subjektiewe term
Dit is verseker subjective.
Per trust kan dit wees vanaf R350-R1000 per maand afhangend van die kompleksiteit. Hang ook af hoeveel trust jy het. Die opstel kan wees vanaf R4500-R5500 afhangend van waar jy dit doen.
Your are lucky dude, she is awesome.
💪🏻
Is there capital gains tax on the sale of the property later down the line even when in a trust?
Yes there is. But there are ways to reduce your taxes in the trust. 💪🏻
@@louisreynhardt Thanks for reply...
I know this has nothing to do with the video , but what do you think of the stock called orion minerals. Its currently on 17 cents (in rand)and i think it has huge potential for a upside in the next few years coming
I can only comment and say that this is not a profitable company. Although the share price can go up or down, I only invest in companies that can generate free cash flow.
To put it in perspective, just because a share is cheap doesn't mean it will go up. Small caps are very risky because there is so much that can affect the company. The main issue is always debt. They have tons of debt with no profit to pay it off, so you fall into a debt spiral.
Great content.
One little question -
Regarding SARS, the bond payments for the house that's owned by the trust, since you are paying them will SARS want 20% of each payment?
I ask because when you contribute assets and money towards a trust, they tend to want a 20% cut of the proceeds.
Thanks Meneer.
Thanks for watching. You might be confusing this with dividend witholding tax. Buit to answer your question: No, you want have to pay them that 20% you mentioned
You will have to get an accountant that can help you compile statements and submit your tax returns. They will heavily depend on your income and deductions. Luckily there are ways to reduces taxes within these entities.
Thanks Meneer.
@louisreynhardt Greetings Sir, thanks for the informative videos. Regarding an accountant l know it depends on individual situations but could you possibly gv an idea of how much it would approximately cost to manage a one house portfolio with several small businesses.
Also do you have an accountant you can recommend. Regards
Do banks grant bonds on Pty and trust ?
Generally they do, but you will have to stand surety for the amount of money the trust or company owes the bank.@@sandilezulu982
What must I do if I want to remove a person from being a Trustee?
You can consult with a attoreny or the person that helped you with the trust or by an order of Court if the Court is satisfied that such removal will be in the best interest of the trust and its beneficiaries ... this is just sinply put so uts best to consult with a professional.
l definately subscribe to this page
Welcome my friend 💪🏻💪🏻
@louisreynhardt
1. How long after set up of the Trust can one apply for a home loan, with you standing as surety?
2. What are the typical monthly admin fees for running a trust?
1. Immediately if everything is set up accordingly.
2. Depends on the size and complexity of your truts, but anything from R350 per month up until R1000 for most
@@louisreynhardt ok then my last question around that is, can you work the set up and monthly admin fee into a bond somehow?
@DeeBoy-gq1vr unfortunately not, this is going to be a personal monthly expense
@@louisreynhardt ok i göt you, thanks
Hello Louis, do you think there will be much future capital gains over time ? Andy
Hi Andy, it really depends on the area and type of investment. But yes, in the past decade, there has still been growth even though we have tough political issues. I try to focus on equity and cash flow instead of speculation on appreciation. Hope this helps. All the best
what are the differences between a trust or company?
In a company, ownership is divided into shares, and each shareholder has a say in how the company is run based on their shareholding percentage. In contrast, a trust is controlled by the trustee who manages the trust on behalf of the beneficiaries
Also, a companies assets are linked to your personal name if you own the shares. A trust is a seperate entity and that's why people will combine a company and trust ownership for the best protection etc.
Do this include Business properties?
Hi Stefan, just maybe rephrase the questions? If you have a running Bussines, your finance will be acquired in the first way I mentioned in the video.
Hi, have you made a video on how to open a trust ?
Yes, I've touched on the topic in many of my videos. This is something that is done with a professional. You can pop me an email at louisreynhardt@gmail.com if you want to find out more.
Thank you for your willingness to share knowledge, I will sure pop you an email when I'm ready to buy my first property some time this year @@louisreynhardt
@CecilMkhabela Pleasure my friend. Trying my best to empower Where I can. All the best 💪🏻
How does one open a trust ?
I will be making a video about this soon 💪🏻💪🏻
Q: If you for example) owned 5 properties, do you have 1 Trust of 5 Trusts?
I would say 3 to 4 porperties per trust is a good rule of thumb.
Okay thanks for that Louis@@louisreynhardt
Do you offer, courses or mentorship on property management and real estate?
Hi, yes I do, you can follow the course link or pop me an email at louisreynhardt@gmail.com 👊🏻
To secure your spot, simply click payhip.com/LouisReynhardt and follow the easy registration process
Witch type of trust fund is the best?
A living trust or inter vivos trust is used. The exact structure can depend on the complexity of the portfolio.
What is the Tax on a Trust 45%?
Yes, that's correct. But theres many ways to pay much less tax.
Trusts in South Africa carry a higher tax rate, wouldn't it be better to use a company than a trust ?
You are right. But there are many ways to legally reduce your taxes and ultimately pay little to no taxes
The issue is financial statements on the trust...it still has to show financial stability...I am certain the banks will look at that..with "redling" some races in SA will not pass that bank test/requirement. Ideally the surety can work and take the strategy
Great insight. That is why most will have to begin with signing surety. Even with surety, your trust needs AFS. But as you grow your assets, and hopefully your income too, eventually your trust should be able to stand on its own.
Will it be a bad idea to just use a Company for now, maybe do a Trust in years to come?
That’s what I’ve been asking myself because being 22 and having a trust the charges are a lot
You can start with a company. Just remember your accounting fees will still be applicable. But its still better than buying in your own name.
You certainly can, juat acknowledge that there will still be accounting fees involved. Also those cost are tax deductible
@@louisreynhardt thank you so much for always educating us
Death and the corresponding estate is the new business venture explored by attorneys and brokers. If there are any outstanding debts, they simply sell the property to cover the debt.
I know of a few cases where the elderly ladies ended up with nothing after their husbands passed away. This is one good reason to have a property in a trust. The property cannot be touched should there be expensive medical bills.
Just on a side note..do not let a broker or attorney be the executor of the estate..do it yourself, otherwise one is handing all authority regarding the estate assets over to these guys
Great input. Thank you for taking the time to share. I agree, using trusts can be a great way to pass on your wealth without paying taxes. Generally you can let your will and testament be handled by the bank and negotiate executors fees. But majority of your assets should be in seperage entities and your replacement trustee will just carry on with the trusts.
When considering all of this. How much can we expect to pay monthly for other fees like accounting, trust admin, lawyers etc?
This is something I need to get my head around. To make these extra payments but in the long run it will be worth the extra cost, correct?
It's definitely worth it in the long run. You will benefit a lot more when you structure it correctly from the start. The cost can vary quite a bit.
To give you an idea, the trust setup cost is around R4500 and around R450 per month. Some companies charge a yearly or once of management fee, but it also depends on the complexity of the entity. I would suggest consulting with 2 or 3 accountants and getting some quotes to get accurate numbers that you can budget for. Hope this helps. 💪🏻
Can I sell my property to my trust?
Yes you can, but it will be a normal sales transaction with cost involved
You are saying that you can use the company statements/financials to get a loan, but surely you don't want to buy more than 1 property in the same company?
I would say 3 to 4 properties per entity makes sense.
Just imagine having a company for every property you own. The cost and admin involved will kill you
Thanks for all the great content Louis. If I'm understanding you correctly, you'd say the ideal is to ringfence 4 (maybe 5) properties per company? Any risk if all of them use the same holding trust?
5 per entity
@jacokotze5754 Yes, as a rule of thumb. Ideally, you will create a new holdings trust for your next 5 properties 💪🏻 but like you can imagine, it starts getting expensive real quick
8.33min of waffel
But still you are here watching