FAQ

This is a very relevant question. Each investment is different as each investor has a different reason for wanting to invest offshore. Depending on various factors, we focus on developments ranging from as little as £60, 000 in areas such as Leicester to £500,000 in London. Other factors being cash or mortgaged. Currently banks are only lending funds for sales above £100,000 of which at least 30% would have to be an equity stake excluding transfer costs. BDB will provide a full cash flow analysis showing the exact equity requirements and what the anticipated rental income will be to cover your bond repayments as well the expected return on investment. Having factored in all variables it would be best to consider all options available and then make a decision based on the requirements of each individual client.

 

What are the future prospects for investment properties in the UK and Australia?

Both the UK and Australia are vibrant ever expanding countries within the global economy. There will always be more and more people wanting to be a part of these first world economies as well as the vast opportunities they offer. Both the UK and Australia have strong economies, stable governments, well developed infrastructure as well as skilled and well paid workforces.

 

In previous years it was a much more complicated and time consuming exercise to transfer funds out of the country, fortunately foreign exchange rules have been changed and South African residents are now allowed to transfer R4m  (R8m per married couple) per annum in order to purchase offshore property or use for foreign investments. Once a Tax Clearance certificate has been obtained the funds can easily be transferred to the investors own offshore bank account.

Once a property has been decided on and the tax clearance certificate approved the funds are  transferred to solicitors (lawyer) in London who in turn transfer the funds directly to the seller as soon as all contracts have been signed. In this manner no funds are ever handled by third parties or even by BDB International. Thus every client can rest assure that all legal procedures are being followed and their funds secured.

 

Why is investing in International property, and more especially Australian and United Kingdom residential property, viewed as being a better investment than South African Property?

Investing in residential property (in Australia and the UK) provides the investor with investment portfolio diversification through ownership of an asset in a first world economy. It also allows South Africans the added benefit of a Rand hedge. This is by far the safest way to hedge against Rand volatility and political instability whilst simultaneously creating a nest egg in a stable, first world economy. Residential property is regarded as one of the safest investments and shows almost constant growth in value with good taxation benefits.

 

What are the expected benefits from such an investment?

The benefits include, but are not limited to:

• As with all property, the ability to ‘gear’ the purchase with the added advantage of very low interest rates.
• The current drop in the property market makes it the best possible time to buy in a down market
• The Rand hedge achieved by investing in first world economies
• The investment is managed by BDB
• Residential property is in short supply throughout the UK and Australia – supporting a stable market as well as a large supply of tenants
• Tax structures are set in place to support the investor in achieving the highest possible return on investment
• The structures established gives the investor the benefit of  extracting funds by selling or borrowing against the investment
• Rental income generated by the property supports excellent cash flow
• Capital appreciation of the property amplified by the exchange rate
• Investing in offshore property is a safeguard against fluctuations in the South African economy brought on by either political instability or rising inflation

 

What are the risks involved with offshore investing?

There will always be risks involved with investments:

• The property market can drop from time to time as we all know that property supply and demand is an ever changing cycle
• Capital growth on the investment may be lower than expected when selling at the wrong time
• Purchasing property at the peak of market growth and having to then sell the property before the market recovers
• Properties bought through a mortgage could be affected by rising interest rates
• A loss of rental income arising from tenants vacating the property and a resulted delay in finding new tenants

 

 

What are the returns that an investor can expect to achieve?

In the current market situation an accurate estimation would be very difficult to make as capital growth will vary on a large scale.  The investor can decide not to pay off the capital loan, but only the interest, which is also fully tax deductible and another of the many benefits of investing offshore.

 

What is required from the investor once the property has been registered in his or his nominated company’s name?

Once the property has been purchased and registered in either the investors own name or his nominated company, the management issues are dealt with by BDB and its associates. We facilitate all the letting and management issues from day one, which includes finding tenants, repairs and maintenance as well as monthly Landlord statements. In this manner each investor is constantly aware of all issues relating to his property but without having to keep an eye on the management on a daily basis.

 

What are the average lease terms and who decides on them?

Typically leases are 6 month or 12 month contracts depending upon market conditions at the time and are in some cases paid in advance. The letting and management company, appointed by BDB, will negotiate all the relevant terms and conditions. They will also be responsible for the tenant check-in, check-out reports, maintenance of the property as well as any issues relating to managing the property. This means that the investor won’t have to worry about any letting or management issue relating to the property as all aspects will be covered on his/her behalf.

 

What procedures will be followed once the tenant vacates the property?

Two months prior to the tenancy ending the property is advertised and a replacement tenant signed up as soon as possible to avoid any gaps in tenancies. Rentals are constantly high due to strong demand because of population increase as well as immigration. This situation will most likely continue as there is a constant shortage of rental properties available to tenants.

 

What is the typical management fees involved?

All of our agents charge a 10% plus VAT management fee which is deducted from the monthly rental income and the balance is then transferred to the Landlords bank account. We will then forward the landlord monthly statements reflecting income and expenses relating to your property. Service charges(Levy) and ground rent expenses will be reflected in these statements. As landlord it is your responsibility to check that your rent is being paid into your bank account. Before moving in the tenant must pay a deposit equal to at least one full months’ rent. This deposit will be used in case of any loss of rental income as well as any damage caused by the tenant. Unlike the current situation in South Africa where the tenant has all the power, the roles are reversed in the UK and Australia where systems are in place to specifically protect the landlords’ interests and that of the tenant but on a fair basis.

 

Are the properties bought furnished or unfurnished?

Most of the units are let completely furnished and this is another service BDB offers the investor. We are responsible for installing the complete furniture pack which includes everything needed to let the property as fully furnished. We use a wide range of suppliers and this ensures the investor of top quality furniture at the best possible prices available.

 

Will there be any form of Insurance?

As with all property investments there are various insurance options available to the owner. The investor is introduced to all the options available to him and once a decision has been made BDB will ensure that all relevant processes are undertaken to fulfill the investor’s requirements. The landlord may also insure himself against loss of rental income if he so wishes. The property is insured by the management agents (body corporate) and these costs are part of the service charges (levy) charged annually.