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| What implications does this have on me being a South African based tax resident? |
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All investments should be disclosed in South Africa for tax purposes. We suggest you seek independent tax advice. A double taxation agreement is in place between the UK and South Africa. In simple terms, this means that an individual will only effectively be taxed once and the amount of the tax paid will be at the higher rate of the two countries.
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| What is the difference between freehold and leasehold? |
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Apartments / flats are generally sold in the UK on long leasehold interests. These are typically 99 years, 125 years, 150 years or 999 years. A ground rent is usually payable to the freehold owner, often varying according to the size of the unit and typically increasing every 25 years from a starting point of between £150 and £750 per annum. The lease will also provide for maintenance of the development and payment of service charges for such maintenance. Freehold is the same as ownership in South Africa and the property is owned outright.
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| Who will be my attorneys? |
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IPS has partnered with Cripps Harries Hall to act as your local attorneys in the UK. The developer will appoint the attorneys in the UK who act on their behalf.
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| Who will arrange my mortgage? |
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We recommend Omega Finance who will broker the best mortgage offer for you, based on the opportunity. There are over 3,000 different ways to borrow money in the UK and it is a very intricate process to ensure the best offer is brokered. Omega also specialise in brokering for South Africans based in the UK and South Africa and have extensive experience in this area. It is important to note that you are not bound to use this broker however.
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| What happens if the geyser leaks? |
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The management agent will have a number of maintenance partners which can repair and maintain properties. This would be down to the account of property owner.
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| What is UK Withholding Tax |
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Rental income received on UK properties is subject to a withholding tax at source. This tax is currently 20%. For UK non-residents there is a Non-resident landlords’ scheme which may allow landlords to receive the rental income gross. Tax is then payable on profits after the deduction of allowable expenses such as mortgage interest and property management fees. In practice this removes the cash flow problem, the withholding tax would have, on the payment of mortgage interest.
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| What happens if the property market crashes? |
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This is an inherent risk with property, however we reduce this risk through sourcing property in well reserched areas with higher growth potential and strong rental demand. This ensures you can ride the property cycle and minimise the risk over the medium to long term.
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| What do you mean I cannot get a mortgage |
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The UK is different from South Africa where you get a AIP (Acceptance in Principle) from the bank, upon signing the contract which makes the contract legal and binding. To ensure you will get a mortgage, our partners undertake significant due diligence to ensure the investment is sound. It is imperative that the borrower maintains their financial status in order to qualify for a mortgage.
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| What happens if the property has a structural defect? |
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The mortgage lender instructs a Building Surveyor in to inspect all the buildings once they make an offer, or the offer is subject to survey. Thus any defects will be highlighted. All new builds in the UK are backed up by the NHBC or Zurich guarantee which provides a 10 year guarantee on the building.
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| What mortgage offerings and how much can I borrow? |
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There are a variety of mortgage offerings, including interest only, interest & capital, fixed and discounted rates. The UK banks are asset based lenders and therefore lend against the asset, and are more concerned about the rental potential of the property than your individual income. An FSA approved mortgage advisor will be able to offer more detail on the products available.
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