 Hello ladies and gentlemen. It is such a privilege and honor to have each and every one of you joining. I'm very very excited for the content that we are going to cover and This session is a very very very important session because your structuring is the foundation of your property investment portfolio And it is so so so important that your structure is correct with that ladies and gentlemen It is so important that we are consistent. It's not about taking massive action now It's about taking consistent action on a day-to-day basis. We bold our property portfolios We bold our wealth. We bold our financial freedom line upon line and Precept upon precept we want to Consistently bold towards financial freedom and towards creating wealth and and Building a property portfolio that can make those those options available for us that we are looking after Now ladies and gentlemen, let's talk about structuring. How should you? I know that's why all of you are joining So we are jumping right into the meet and that is how should you structure your property portfolio? I'm sure many of you have got questions first things first There are three different structures in which you can buy property as we have just mentioned You can buy property in your own name You can buy property in a trust and you can buy property in a company now Each of these approaches has got its advantages and it's got its disadvantages The question that I want to ask you is how many properties do you want to own? Because if you want to bold a property portfolio, you need to make sure that your structure or Structures are in place now ladies and gentlemen Your structuring and the entities that you use to bolt your property portfolio It's like the foundation of a building. I think about it the foundation of a building You don't have any immediate benefit of it You can't go sit in the foundation and enjoy the scenery the foundation is not even seen But ladies and gentlemen if the foundation is not strong Everything that is bold on top of that foundation is also Address so ladies and gentlemen, it is so so so important that before you start Building your property portfolio You need to make sure that you've got a strong foundation now the Example that I always use when I sit with my clients when it comes to structuring is The example of running a business Imagine you've got a business and you run your business through your savings account and as your business grows you get to a point where you need to get financing from the bank or funding from an investor and You go to the bank or to the investor and you say listen. I've got this business I'm running it through my savings account. I would like to get financing or funding Do you think that the bank or the investor would take you seriously? Of course not you are not running your business in a proper structure Whereas if this business was for example in a company with its own bank account with its own financial statements Obviously, you would have been taken much more seriously and the Probability and the possibility for you to get financing or fun funding is significantly more so Keeping that in mind ladies and gentlemen the exact same thing Applies to your property portfolio when you are folding a property portfolio Ladies and gentlemen, you are running a business make sure that you run your property portfolio like a business This business should be in an entity of its own It should have its own bank account all the rental income should come into that bank account all the Outflows and expenses your bond payment your levies your rates your maintenance your admin fees Should go out of that bank account There should be financial statements set up on that business because if you go that approach Your chances and the probability and the possibility of you getting more financing and more funding So much more ladies and gentlemen. So this is the starting point and this is the thought that I want to leave with you When we start talking about structuring and that is run your property portfolio like a business Ladies and gentlemen, let's talk about structuring. There's four reasons for me Why structuring is so important and the first one we've just touched on ladies and gentlemen That's financing capability the possibility for you to bold a bigger property portfolio Outside of your name is significantly more than when you are trying to do it in your own name And there's a couple of reasons for that We spoke about the structure and the professionalism of your business that you are approaching investors or the bank with but secondly ladies and gentlemen Remember that as an individual you fall under the National Credit Act now The National Credit Act was established in the 2000s and for a very very good reason It was to ensure that people are not over indebted and that Irresponsible lending does not take place, but for an investor It has also become a limitation to the size of the property portfolio that you can bold But when you bold in an entity such as a trust or a company You don't fall under the National Credit Act and that means ladies and gentlemen that you can bold a significantly bigger property portfolio than what you would bold in your own name so the question that I very very often get then is so How would an entity get financing if it doesn't have a track record and you as this trustee of the trust or as the Director of the company would still have to sign surety in many instances for the transaction But remember now the asset is owned in the entity and the debt is also in the entity not in your name Even if you have signed surety and that gives you a good credit record and that gives you the ability To bold a bigger property portfolio the second reason Why the correct structuring is so important and especially trust structuring in this regard ladies and gentlemen Is for asset protection? Imagine you've got one basket and in that basket you've got apples and one of those apples start going rotten All the other apples could be affected by by that rotten apple But if you have multiple baskets and an apple in a basket goes rotten It does not necessarily affect the other apples in the other basket. So ladies and gentlemen, that is what asset protection is about It's about ring fencing. It's about protecting your assets And in order for you to protect your assets ladies and gentlemen, you have to have Multiple structures in place. Firstly, you can't have everything in your own name and secondly You can't have everything in one structure. That is where why we always have a family trust Separate and we have our property trust or holding stress that holds our shares in our companies Separately from that. That is very very important ladies and gentlemen because that creates the opportunity for you to protect Your assets the third reason why structuring is so important and especially again referring to trust structuring ladies and gentlemen is for Continuity for balding a legacy for proper estate planning Do you know that if you have an estate that is worth 20 million rand and you pass away? You are your estate is probably going to pay between five and seven million rand in costs at death That is your estate duties your capital gain stacks your executive fees and your transfer fees Now if your assets are not held in your own name, but it is held in a trust, you know what that comes down to? Zero you don't pay a single cent in estate duties or Executive fees or capital gain stacks now that by itself ladies and gentlemen is a very very good reason To not own assets in your own name but to own your assets everything you own even if it is shares in companies or Properties directly to own it in a trust and then lastly ladies and gentlemen And this is a topic that we can speak about for an hour by itself It's the great tax benefits that trusts and companies give now when you bought your property portfolio in a proper structure There are so many more tax deductions that you can be aware of and that you can deduct to pay less tax Now a trust is taxed at 45% and a company's tax at 28% and often for that reason people would say okay So that means a company's the better option as to how you should buy your property port for Should buy your properties, but that is not necessarily true ladies and gentlemen because in a trust You have got many distribution options in a trust. You have what is called the conduit principle now How the conduit principle works is that any profit that the trust makes whether it is income by nature or capital by nature Can be distributed to any of the beneficiaries that trust will then not pay tax on that income The nature of that income will be retained in the hands of the beneficiary and the beneficiary will then pay tax in their personal capacity So let me give you a practical example Imagine you've got two children that needs to go to university and you need two hundred thousand rent for each of them You could through your Structures or through your property trust distribute money to your family trust your family trust could pay for those expenses for your two children and we can We can allocate it as a distribution to your two children Which will mean that no tax for that four hundred thousand rent will be paid within the trust structures 200,000 Rand will be allocated to the one child 200,000 Rand will be allocated to the other child and because those children are not working yet That is the only income that they have Which means that we can do a tax return for each of those two beneficiaries your two children and The only income that they will show for the year is two hundred thousand rent Now with all the rebates and exemptions that you can apply your effective tax rate on 200,000 Rand of income is going to be significantly less than even what a company pays So it is often possible ladies and gentlemen to pay much less tax in a trust that what you would pay in a company Let's move to the different kind of ways that you can buy property When you are building your property portfolio, like we said first and foremost you have to have a family trust in place a family trust Serves two functions number one It's all it's a place where all your assets your personal assets are acquired They don't have debt to it attached to it and number two It's the entity through which all your money will flow to all your other entities But then when it gets to building your property portfolio You've got a couple of options as to how you can bolt your property portfolio Now this is my favorite ladies and gentlemen, and it's a simple structure that is buying property Directly in a property trust So you've got your property trust and in that property trust you bolt your properties The reason why I like this structure so much ladies and gentlemen first is because it's simple it doesn't mean you have to have a lot of entities and Secondly, there's great tax benefits Especially if you have beneficiaries that you will need to distribute to in the future So a great structure ladies and gentlemen for you to bolt your property portfolio in Secondly, we've got an alternative structure in which you can bolt your property portfolio as well And that is in a company But it is very very important ladies and gentlemen that if you are building your property portfolio in a company That you have a holding stress that holds the shares in that company So you want to make sure that you don't own the shares in your personal capacity now As we have said because a company's tax rate is low It is great for when you want to keep profits within the company However, your distribution options to get the money out of the company is less than with a trust So this option for me becomes applicable Specifically when you and your children and your grandchildren and your parents are all on very high tax brackets And there are no way for you to distribute profits to anymore then this structure makes place So the quick answer that I would give you someone if somebody asks me should I buy a property in a trust or in a Company with a shares held in a trust would then be to for your first number of properties I would say even up to 10 properties buy directly in a property trust or in property trust And after that when you then look when you then look at expanding the property portfolio beyond that Then you can start incorporating holding trusts and companies Then ladies and gentlemen another time that you would use a company or not a trust is if you are doing a joint venture The properties that I own outright or that I don't have partners in are in our property trusts the properties that I own with partners is Those properties are owned in a company and I own my shares in my holding stress and my partner Owns his or hers shares in their holding stress So the structure that you would use when you do a partnership That's ideal for a joint venture or for a partnership is to buy the properties in a company But for each partner to hold their shares in their respective holding stress Now ladies and gentlemen how not to structure your property portfolio and how not to own property is Owning your property in a company with a shares held in your name because if the shares of that Companies held in your name even though the company owns the property You still own the company which means that if something had to happen to you those shares are an asset in your name and If you someday or if you one day pass away Those shares will also form part of your estate on which is state duties Executives capital gain stacks has to be paid and even in some instances transfer duties So ladies and gentlemen, it's very very important that you've got the right structure in place And when you use companies that you make very sure that those companies Shares are not held in your own name, but it is held in a holding stress Then ladies and gentlemen, this is probably the worst way for you to own property and that is in your own name owning property in your own name is risky and It creates a lot of limitations because very often or very quickly ladies and gentlemen You get to a point where you can't grow further I sit with clients on a daily basis that cannot grow their property portfolio further Because they didn't have their structures in place and they own the properties in their own name and they have to now Restructure so ladies and gentlemen, you don't want to you don't want to be in a place Where you own property in your own name? But it may be that you've already started a property portfolio that you've already start buying property and That you have bought properties in your own name So in that in that regard ladies and gentlemen, it becomes very very important that we look at how to Restructure your property portfolio in some instances. It won't be necessary to restructure Sometimes it makes sense to keep some of the properties where they are at but for me in most instances The ideal is to get the property out of your name and into an entity such as a trust And also for you in other words to get the debt out of your name and to get that into an entity such as a trust now Looking at that ladies and gentlemen, there's obviously a lot of costs involved in that so the advantages of Restructuring is the fact that we can get the asset out of our name We can get the liabilities out of our name and we can also make a lot of capital available And we're gonna speak about that now how you can make capital available through restructuring But there are also disadvantages and the disadvantages are the transfer costs that need to be paid The transfer duties that needs to be paid the bond registration cost that needs to be paid the bond Cancelation fees and in certain instances the capital gains tax So those are things where we need to sit and look at your properties and make sure What are those costs going to be and does it make sense to restructure or not? And how should we restructure now? Let me give you a practical example if you own a property that is worth a million rand You've bought it for 900,000 grand and you still have a bond of 800,000 grand on that property You can sell that property to your property trust your property trust is the buyer You are the seller and that means that The trust would apply for financing as trustee you would sign surety for for that loan But the trust would acquire the asset and the trust would have the debt The million rand would be paid out to the conveyances And and the bond that's outstanding of 800,000 rand would be settled Which means there's 200,000 rand that gets paid out to you. That is how you make the capital available now out of that 200,000 rand you can cover the restructuring costs and let's say you for example have 150,000 rand left that you can now not just keeping your property trust But you can park it in your excess bond that means that you don't pay Interest on that money or that additional bond or the higher bond that we've taken out now You don't pay interest on that but that capital is accessible for you and you can use that That that capital for one of four things you can put in your excess bond as part of your reserve fund You can have you can keep it there for safety or for emergencies Number one number two you can use it to expand your property portfolio for transfer fees and bond registration costs and Deposits if necessary for your next property You can even use it to cover shortfalls if there's shortfalls that needs to be covered Or if that reserve becomes very healthy you can start using and enjoying some of that money As your property portfolio grows. So those are all things that you can do when you restructure That is it from my side ladies and gentlemen. I am looking forward to walking a journey with you I would love to assist you with putting your structures in place and also with your restructuring I want to invite you to a one-on-one Structuring consultation where we sit and where we look at where you are at What structures are needed for you and what we can do to put the right structures in place for you and Also for you to bolt your property portfolio. Thank you very very much for joining today. I'm looking forward to walking this journey with you. Goodbye