What are my tax implications and will it be a wise move at age 42 to be taking out a bond for R430 000?

I can afford to pay the bond, but my concern is the maintenance of the buildings and any hidden costs involved.

Answer:
It's difficult to say whether a property investment is the right investment for you at this stage of your life. You are in a fairly good position as your first home is bond free, which is important for your retirement.

You do need to be careful with property investment, as with any other kind of investment. Rentals are not as strong as they used to be, while property prices have risen. You may need to wait a few years before you can comfortably cover the bond amount with the rent. You also need to be aware of possible vacancy periods, when you will not have a tenant in place.

If you buy a sectional title unit, you will need to pay a monthly levy to the body corporate, and this money will be used for any maintenance or garden service required. You may find this to be a much easier option, as you know what your costs are upfront. If you buy a freehold property, you will need to save money towards maintenance yourself, and will also have to find a contractor where necessary.

You should regard property as a conservative, long term investment. Rental properties are attractive to many people because of the possibility of a passive income stream, especially important in retirement.

Tax implications will depend on whether you buy the property in your name, or through a CC or trust. If this is your second property, you may well find it's easier to buy it in your own name as the capital gains tax will be much higher if a legal person (trust or CC) is involved. For income tax purposes, you will have to declare the income you receive from the property, as you would any other investment. Keep all documents relating to your purchase of the property so that, when you finally sell the property, it will be easy to calculate the tax you owe. You can find out more information from the SARS website: www.sars.gov.za.