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Should you buy property in a business?

Sandra is the director of a successful home decluttering business called “Chaos to Calm.” All the money she earns in her business does not belong to her, it belongs to the business. At the end of every month, she can choose to:


* draw a monthly salary and pay PAYE on that income according to the tax bracket she falls into

* or take dividends which would be taxed at 20%


Of course, she could just leave the money in the company and use it when she finds another property, and that money will be taxed at 28%.


Sandra is smart. Sandra works closely with her accountant because she understands that in order to live in a civilized society, taxes need to be paid but she certainly don’t want to pay once cent more than she should be paying.


Sandra also knows that in order to get the banks to take you seriously as a business owner, you need to have:

  • 3 years worth of books

  • Show a profit

  • Have a good credit score


Wait, what?


Show a PROFIT?! I can hear all the small business owners groaning. “Come on Tanya, you can’t be serious. You know how it is, small business owners are experts at hiding any profit under the table. It’s how we roll!”


And THREE years worth of books!? I been SO busy focusing on trying to grow my business, I haven’t had a chance to look at the books! Who has time for admin when you are trying to put bread on the table.

Or…

I don’t have a business yet and I want to start investing NOW!

As Marie Forleo teaches, everything is figureoutable. To every problem there are multiple solutions.

Let’s tackle the prickly issue of profit first.


If you want to use your business as an investment vehicle, you need to start showing a profit. When you go along to meet Blair Du Pont, your bank manager at African Bank, best you make sure you can prove to her you know how to run a successful business. That means making sure the books are up to date, the company is running at a profit and has a squeaky clean credit record. Blair does not suffer fools gladly and won’t think twice about showing you the door with a perfectly manicured hand if you don’t meet all the criteria.


What about investing in a brand new company?

You can buy property into a brand new company as long as you, and any other directors, are prepared to stand personal surety for the property. Once the business has a profitable track record, you will be able to buy property in the company itself.


Remember there are costs to set up your company and further costs to administer the company and keep the books up to date. An accountant will need to prepare annual financial statements for you and advise you on the best way to structure any profits you make from your property investments.


Awesome yay, let’s do this THANG!

Now, I’d love to hear from you. Let me know which vehicle you think would best suit you on your property investing journey by clicking here