Author Topic: SELL PROPERTY OR AIRBNB  (Read 7088 times)

jonb

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SELL PROPERTY OR AIRBNB
« on: April 13, 2016, 01:30:01 pm »
Hey All

Hoping to get some opinions on this

I am based out of SA but have a small property in Cape Town CBD, purchased 10 years ago ( Still paying off! ) but at the time it was a no go area and now in Bree street its possibly one of the most sought after city addresses

I am looking at selling to realize the profit as its a key time

Option 1 :

Sell take money, invest .. easy more liquid and easier to protect against a weaker currency etc.. with along term view of buying a bigger home to live in later when returning to SA

Option 2 : short term let on AIRBNB , from research i should be able to get around 3 x the bank repayments, invest the excess money and keep property

Option 3 : pay off the loan and AIRBNB the property so take the full amount as a dividend and invest

Anybody have experience in this ? or a few opinions :)

Patrick

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Re: SELL PROPERTY OR AIRBNB
« Reply #1 on: April 13, 2016, 01:54:04 pm »
Tough call, you should run some numbers. Selling will make you liable for capital gains tax. You're not a resident, so it will need to be a very big profit before it takes effect though. But then you need to look into the investment returns. If you move the money out of SA for investing, it'll cost you about 1% in fees. Then you'll also have to pay dividends tax on the returns. I believe the global average for stock market investments is 6% over inflation, does that make it worthwhile for you compared to the airBNB returns after tax? airBNB will be a little more work, but if you have a reliable person in SA to manage it then it won't be too much. Your location is probably prime for it.

AirBNB are fantastic to deal with. My wife airBNBs our place. 3 days of bookings pays for the levy, rates, taxes, water and electricity. If we get 10 days bookings it pays for all the above and the bond too.

We've had a couple of issues to deal with, I'd say 1 in 5 guests do something we don't like, and 1 in 10 are horrible. In all cases though airBNB has gone totally above our expectations in resolving issues for us.

We also stay in airBNB places when we travel, and once arrived to a dump, complained the next day and they refunded us in full and helped us book another place. Even though the next place was more expensive, they paid in the difference. Such a pleasure working with them!

jonb

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Re: SELL PROPERTY OR AIRBNB
« Reply #2 on: April 13, 2016, 02:35:38 pm »
So good to hear about airbnb, thanks Patrick

Out of curiosity do you guys let whole house or parts of it?

No CGT for me as only home and under the threshold... the investment has done extremely well and originally i just wanted to take the profits and try buy a bigger place in a suburb with the idea to live in it


However been reading so much on how when doing this losing the power of the actual investment.. Tempted to continue renting it but via airbnb now , using proceeds to reinvest ( globally or in SA ) and then when back possibly rent and continue this as a small business

But you 100% right ... need to run some numbers!



Tough call, you should run some numbers. Selling will make you liable for capital gains tax. You're not a resident, so it will need to be a very big profit before it takes effect though. But then you need to look into the investment returns. If you move the money out of SA for investing, it'll cost you about 1% in fees. Then you'll also have to pay dividends tax on the returns. I believe the global average for stock market investments is 6% over inflation, does that make it worthwhile for you compared to the airBNB returns after tax? airBNB will be a little more work, but if you have a reliable person in SA to manage it then it won't be too much. Your location is probably prime for it.

AirBNB are fantastic to deal with. My wife airBNBs our place. 3 days of bookings pays for the levy, rates, taxes, water and electricity. If we get 10 days bookings it pays for all the above and the bond too.

We've had a couple of issues to deal with, I'd say 1 in 5 guests do something we don't like, and 1 in 10 are horrible. In all cases though airBNB has gone totally above our expectations in resolving issues for us.

We also stay in airBNB places when we travel, and once arrived to a dump, complained the next day and they refunded us in full and helped us book another place. Even though the next place was more expensive, they paid in the difference. Such a pleasure working with them!

Orca

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Re: SELL PROPERTY OR AIRBNB
« Reply #3 on: April 13, 2016, 02:55:08 pm »
I think you need clarity on the tax issue. As it is not your primary property, sars will see it as an investment and you will pay CGT on the amount higher than R30k.
The R2m odd exclusion will only apply to your primary home if you live in it.
I started here with nothing and still have most of it left.

Patrick

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Re: SELL PROPERTY OR AIRBNB
« Reply #4 on: April 13, 2016, 04:15:34 pm »
Out of curiosity do you guys let whole house or parts of it?
The whole house. We either stay go on holiday ourselves then, stay with family or in what must be joburgs smallest apartment we built (9sqm!).

jonb

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Re: SELL PROPERTY OR AIRBNB
« Reply #5 on: April 13, 2016, 04:30:04 pm »

@Orca

its the only property I own, so therefore is my primary property right?

I might not live in it at this point but have done before ( all municipal bills in my name ) and currently work in Amsterdam




I think you need clarity on the tax issue. As it is not your primary property, sars will see it as an investment and you will pay CGT on the amount higher than R30k.
The R2m odd exclusion will only apply to your primary home if you live in it.

Orca

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Re: SELL PROPERTY OR AIRBNB
« Reply #6 on: April 13, 2016, 05:37:52 pm »
The plot thickens now. Your primary property is where you dwell and as you are in the Netherlands, you will be subject to Dutch tax laws as the DTA will give the Netherlands the right to tax you but the CGT will be capped at the DTA rate.
« Last Edit: April 13, 2016, 05:44:23 pm by Orca »
I started here with nothing and still have most of it left.