Not the right way to stretch your dollars...

We all like to save some cash when the opportunity arises, but I am sure you will all agree that sometimes saving money in the short term leads to bigger bills later down the line.

The reason I bring this up is that into today’s economic climate where cash is so tight and transfer fees and capital gains tax on property transactions can be the deal breaker, more and more clients are tempted to take a short cut.

There are certain agents who will offer their clients the option of lowering the Purchase Price on an agreement of sale in order to lower the cost of Capital Gains Tax payable by the seller and Transfer Fees payable by the purchaser. The rest of the Purchase Price is paid “under the table” and the Seller, Purchaser and Estate Agent all benefit by avoiding the full cost of taxes. Sounds like a win-win situation, if you don’t consider the moral implications of tax evasion!!!!

However, the down side, (Yes- you knew it was coming!) is that the Purchaser is not advised properly by the agent. If you lower the Purchase Price on the agreement of sale when you buy the property, it means when you come to sell it in a few years’ time at the correct market value, your “Capital Gain” will be much higher, and you will have to pay 20% of this gain. Your saving at 7% of the lower purchase price maybe a few thousand dollars, but your tax bill when you sell the property could be tens of thousands.

The only person who really gains by lowering the Purchase Price in the long run is the seller, and he will be long gone by the time you sell your house and pay his tax bill for him. Remember that all properties bought pre 2009 only pay 5% tax on the FULL Purchase Price. Post February 2009, all sale of property incurs a 20% tax on the capital gain of the property.

Say NO! to lowering the Purchase Price – it will save you money in the years to come and you won’t have the guilt of tax evasion on your conscience.

On that note, I would like to wish all our valued clients, friends and supporters a peaceful, safe Christmas period and a prosperous, dream fulfilled 2013!

Love from all of us at

Page Properties…

Goal setting and investment

Wow! Another week gone already…I have been reading a lot about success and property investment this week, and so I thought I would share some of the insights I have gained. You never know, they might just be the push you need to take control of your financial future.

First things first, if you are going to be successful, you have to set goals. How will you know if you have succeeded without goals? Goals achieved are the benchmark for how successful you are. “A goal is a dream with a deadline,” says Napoleon Hill. If your goal is to own your own home or a profitable property business, then if you don’t set a timeline for this, you are only a dreamer. Life passes dreamers by. The first thing you need to do, is decide on your dream, however frivolous it may seem to you, and then set a deadline to achieve it. This could be relatively short (say 6 months) or long term (10 years.)

This next part applies primarily to those people who would like to invest in property as a business, but the choices you make when buying a family home should also be based on these points.

Ok, so now you know you want to invest in property, ask yourself why you want this. There could be any number of reasons. Being rich, is not a good enough one, by the way, so get creative. It could be security in your old age, a family home for each of your kids, or more philanthropic, like helping the homeless with low cost housing. Knowing why you want something, makes it easier to stick to your goals when the going gets tough, which it will, I promise.

Now, the hard part starts; do some research, in fact do lots and lots of research. Find out which parts of the country or town are going to be most sought after in the near future. These suburbs or areas will have cheaper houses than the current favourites. For example all the areas just outside the “golden triangle” will become more popular as the population grows and when all the professionals in the diaspora return. There are not enough properties in the upmarket areas to service the growing needs of Zimbabweans. Greystone Park, Chisipite, Alex Park, and Mt Pleasant are all areas that have fantastic growth potential.

Find out which areas are good “water” areas, as some properties are priced below value as there is no borehole, but if you were to sink a borehole and get water the value of the property would increase immediately.

 Find out what the market is looking for. Do people want to live in cluster developments or large properties with their own gardens and extras, like a pool and a tennis court? I have found quite a shift recently towards cluster or closed community developments, probably because of the security which these types of property offer. Zimbabwe does not have enough cluster developments to meet demand, and this fuels the ever increasing prices of such developments.

Remember as a property investor it is your job to try and predict the future growth of the property market. We all know that property is a great investment and that in the long term prices will continue to go up. But the rate of this escalation is not so easy to predict, and different areas grow in value faster than others. Research is the only way to make an informed investment decision. Remember property investment should not be made with the heart, but clearly with the head and a little bit of gut instinct. And always buy with the profit already in the investment, in other words if you were to put the same property on the market the next day, without doing anything to it, you need to know that you will be able to sell it for more than you bought it for.

 Of course, the points above are not exhaustive, and I am sure you could all think of many other points to add, but I wanted to get your minds thinking about property investment in Zimbabwe and how to achieve your goals.

OUR NEWS…

Last Thursday we had the pleasure of attending Sabre Business World’s Seminar on the 25 Secrets of Business Success at the Meikles. It was a fantastic day and I think we all left feeling highly motivated and ready to take the Zimbabwean business world by storm.

Thank you to Sally and Brendan Palmer for this inspirational seminar. For more information about Sabre Business World, visit www.sabrebusinessworld.com

And always keep in mind :

“ People often say that motivation doesn’t last. Well neither does bathing…that’s why we recommend it daily.” Zig Ziglar

 Keep yourself motivated and keep improving yourself, and you will achieve everything you have ever dreamed you could have or be!

LATEST LISTINGS

 KWEKWE       $110 000

 

22,6 Hectares of virgin residential land
Ideal for a large scale residential development
(Here’s a chance to invest in property in Zimbabwe!)
All services in place to the boundary of the property, so serving of stands is required.

NOT SO NEW...

ENTERPRISE RD - DRASTICALLY REDUCED TO $290 000

Ideal Office location
4 bedrooms/ offices
Boardroom
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URGENT SELLER

STAY SAFE AND BE INSPIRED!

The truth about commission paid to Estate Agents

Commission is the percentage charged by an estate agent or property negotiator to either sell your property or manage it, in the case of rentals.

An estate agent's job is really to introduce a buyer to your property, in the case of sales, who is willing to buy the property. By law, this is all that is required of an agent to be entitled to their commission. However, a good estate agent will ensure that both parties are happy with the deal and follow the sale right through to the eventual transfer of title to the new owner. Some agents want their commission as soon as an agreement is signed, or at the very latest when the purchase price has been paid.

In my experience, paying the commission on signing is foolish as the sale may still fall through, and most people don't have the money upfront without first being paid for their property. The second option which is paying the commission once the full purchase price is paid, is generally the preferred scenario for most agents. However, I feel this is ethically too soon to accept payment of the commission because the negotiators lose interest in the sale and won't check up on the transfer of title.

The best time to receive payment of commission is when title is transferred to the buyer. There is no law to enforce this, as commission is due on introduction, by law. But, a good estate agent should never be chasing their commissions, they should complete the sale to the very end, and when all parties are satisfied, then they should have their commission.

Now, there are two different types of mandates in Zimbabwe which you can give an agent. An open mandate allows more than one agent to sell your property. Whichever agent introduces the property to the buyer, that is the agent who is entitled to commission. Open mandates are quite tricky, as a non mandated agent may approach you to sell the house, and although you have not asked them to sell your property, you may think it is ok to let them. Your mandated agents can all demand commission if a non mandated agent sells your house. So a word of warning, only let those, who you have mandated, sell your property. You don't want to be paying double commissions or have to deal with quibbling agents.

The second type of mandate is a sole mandate. This means you have given one agent the mandate to sell your property. When that agent introduces the buyer, they are entitled to commission. When you decide to pay the commission as discussed above, is an issue you need to negotiate with your agent.

There is a big difference between a sole agency and sole selling rights. Sole selling rights are not very common in Zimbabwe. Sole selling rights entitles the agent to be the only person allowed to sell the property. This will also prevent the owner from selling the property himself. Basically, an agent with sole selling rights will be entitled to commission when the property is sold, regardless of whether that agent introduced the buyer. My advice is to avoid this type of mandate completely.

According to the estate agents' governing bodies the recommended commission structure is 5% plus 15% VAT on sales. 15% plus 15% VAT on residential rentals and 10% plus 15% VAT on Commercial and Industrial rentals.

You may charge 3% plus VAT on sales but nothing lower. You may charge as high a commission as you like, say 7,5%, but you must have a written acknowledgement from the seller stating they are aware that they are being charged above the recommended scale of fees.

Commission is costly, so make sure you have chosen a reputable agent who will put your interests above their own. Don't be bullied into paying commission early, but on the flip side, remember you are obliged to pay commission if your agent has introduced a buyer. If both sides are honourable, the business transactions will go smoothly.

Visit my website www.pageproperties.co.zw  or leave a comment here and I will be sure to reply to you!

Our Fiduciary Duty to YOU the public...

Our what? Exactly! Who even understands big words like that? Not many, but it is my job to understand, and explain it to you so that you know what is expected of someone who presents themselves to you as an Estate Agent.

Estate Agents in Zimbabwe are controlled by a very strict set of conduct rules that most of the public are completely unaware of.

When one becomes registered as an Estate Agent in Zimbabwe, they have had to have had at least 3 years practical experience in the industry and pass a rigorous set of exams. The most important of which is Estate Agency Practice. This covers all the legal aspects of property sales and rentals, as well as an Estate Agent's Duty to the Public.

I have listed below, in English, not legalese, what you not only can expect, but must demand from your Estate Agent:

1. An agent must put the interests of his client above his own at all times, and must treat the business dealings of his clients as well as he would treat his own, if not better. This means that you can and should demand confidentiality at all times from your agent. He should never try to purchase or lease your property himself, without having first made it very clear to you of his personal interest.

Any Estate Agent is obliged to offer you advice and professional knowledge about the industry, regardless of whether you employ his services. (Much like a doctor is obliged to save lives even if they are not his patients!)

2. Agents should not defame other agents, or treat them in a manner that is inconsistent with fairness, courtesy and professionalism.

3.  Agents should not tout, i.e. should not try to canvass for business by door to door calling. They should not approach you if your house is on the market and ask to sell it. So many people don't realize this and an agent will call them and say, "I have a buyer for your house, please can I bring them around?" If the property is with another agent then you should tell the caller, that they must go through your appointed agent. Sellers can get themselves into all sorts of trouble when allowing a non mandated agent to sell their property as they will be liable for the mandated agent's commission, even if that agent did not sell the property.

4. Agents should not pose as buyers to illicit information from sellers or other agents.

5. Money held in an agent's trust account does not belong to the agent, and under NO circumstances is that agent allowed to use the money for the running of his business or personal expenses, (not even bank charges!) The agent should not move any money in the trust account out of the account without the written permission of the owner of that money. The number of cases that exist of agents "borrowing" money from the trust account and never repaying it, is quite frightening.

The deposit paid for a rental property belongs to the tenant until the end of the lease, and at such time the money will either be returned to the tenant or used to repair the property and pay outstanding bills.

At any stage that you have money in an Estate Agent's trust account, you can and probably should ask to see a statement. All rental properties should have a monthly statement of their account forwarded to the owner and tenant, if the tenant requests it.

If at any stage, you feel an agent is not fulfilling these obligations, you can report them to the Estate Agents Council, and the matter will be taken up by them. If you have been unfortunate enough to lose money from an Estate Agent's Trust Account, the Estate Agents Council has a Compensation Fund, which all agents have to pay money to each year, so that the public can be reimbursed for their losses. Bet you didn't know that...I am letting out all the secrets today, aren't I?

But remember, you have the right to expect the best from the person you are entrusting with your most valuable possessions, so don't settle for less...

Visit my website for more on property www.pageproperties.co.zw

Know your rights as a Landlord

In the past few weeks, I have come across so many people who do not understand the role of their managing agent or their own rights and duties as a landlord. I have decided to debunk the myths and misconceptions that have been allowed to grow, and hopefully, enable you to demand the service you deserve from your agent.


What is an agent? Basically, someone who has been given authority by a principal or landlord to act on his behalf. The agent is obliged at all times to put the interest of his principal above his own, and to conduct the business of his principal as if it were his own. How many of you can say this is the case with your agent? I would love your feedback, so we can discuss this topic.


Your duties as a principal or landlord are to disclose all relevant information about the property and to pay the agent for the work done on your behalf, this is the commission you pay.


What are the duties of the agent? These vary greatly, and you should find them in the mandate letter you have signed with the agent. This is the contract you have entered with the agent. So many agents put the mandate into the lease agreement. This is not correct as, the contract is between you and the agent and not you, the agent and the tenant. If you don't have a mandate letter signed, you should ask your agent for one, as this protects you and also allows you to terminate the contract with the agent if they are not fulfilling their duties.


In my mandate letters I include the following as my duties to the landlord:

•  Vetting references and selecting a suitable tenant.
•  Negotiation of the lease and rental, and the completion of the necessary contract.
• Collection of all rent and a provision of a statement every month. Close control of late and non-payment. (It is a legal requirement for you to receive a monthly statement showing rent received, commission deducted and expenses incurred to maintain the property. You must demand one if you are not receiving one!)
•  Routine quarterly inspections, and attendance to all necessary repairs and maintenance. In this case we will refer to you before incurring any expense that is out of the ordinary.
• Constant review of the lease and rent. In terms of the Rent Regulations 2007  Clause 39.4 “ The lessor of a dwelling may be permitted to apply for a variation of the standard rent after six months from the date of the signing of the lease agreement. Any variation of the standard rent which is 30% or less does not require approval by the Rent Board.”
•  Signing the lease agreement and all subsequent leases, having your power of attorney to do so. (Some landlords insist on signing their own lease, which is also fine.)

      Don't allow your agents to walk all over you, remember you employ them and you can fire them, giving three months' notice of the fact that you no longer require them to manage your property, of course this may be subject to the contract you have signed with them.

     Do you feel you are getting the best service? Let me know your thoughts and let's put a stop to unscrupulous agents taking advantage of the ill-informed public!

Cost of selling your property held in a company or trust

If you read my previous blog about selling your property held in a personal name, then you would realize that there are 2 main areas of cost: The Estate Agent's fees (market appraisals and commission) and the Capital Gains Tax.

With the sale of a property held by a company or trust the Estate Agent's Fees still apply, but the Capital Gains Tax varies and there are accountants' fees and lawyers' fees involved.

Capital Gains Tax is payable on the sale of any shares in a company and the rate is 20%. Some creative accountants may find ways to lower this cost, but it is always best to budget on the most expensive outcome, and be pleasantly surprised in the end if the whole process costs you less. So many sellers have the misconception that there is no Capital Gains Tax due when a property held by a company is sold. They often have been incorrectly advised when they purchased the property and thought that the best, and cheapest way to sell their house in the future would be in a company. Please don't make this mistake!

Properties held by trusts do not incur Capital Gains Tax as in effect no sale has taken place. When you sell your property to the new buyers, you cede your rights to the trust and the Trustees and Beneficiaries change, but the owner of the property remains the same, i.e. The Trust still owns the property. As this transaction does not need to be approved by ZIMRA, the Deeds Office or the Registrar of Companies, it is exempt from Capital Gains Tax. Please note that this is the case at the time of writing, and anything can change in Zimbabwe at any time!!!

Finally, you will have to pay accountants' fees for the change of directors in the company and with a trust you will pay lawyers' fees for the cession documents. These charges vary depending on the lawyer and accountant. It is fairly acceptable to ask the buyer to meet these costs, as with these two types of sale the buyer does not pay transfer fees. However, there are some instances when the fees are split between the buyer and the seller. This is negotiated at the time of acceptance of an offer.

If you have any specific questions regarding the sale of your property, please leave a comment below and I will try and answer it.

Have a great day...