Should South Africans invest in inheritance properties?

As conversations around intergenerational wealth grow, many South Africans may be unsure about how to best handle inherited properties. Whether you’re planning to hold onto, sell, or invest further, REMAX Southern Africa offers expert advice on how to evaluate the financial potential of an inheritance property.

One of the pull factors of inheritance properties is the emotional appeal of leaving a legacy, through an asset, to your loved ones. And for an heir, it can often feel like an honour to be awarded this part of the family’s history. Inheritance properties can also provide peace-of-mind that your loved ones will be financially secure in your absence as it can provide wealth, whether acquired through selling or renting it out the property. However, be advised that both options involve constraints.

According to Adrian Goslett, CEO and regional director of REMAX Southern Africa, “an inheritance property can be a helpful step towards long-term wealth creation, when the correct financial and legal avenues are followed.” Goslett advises not to assume that a profit can be made on every inherited property, as each scenario requires careful analysis.

What many South Africans are not aware of is that heirs also take on the debt, rights, and obligations of the inherited asset. This includes the payments for the rates and taxes, maintenance, insurance, and compliance with municipal requirements.

“Inherited properties may require maintenance or modernisation that can be quite costly. That is why we recommend doing a professional inspection to map out expenses and determine whether the property will provide positive returns on investment,” explains Goslett. In some cases, when all the expenses are taken into consideration, it might be more financially beneficial to sell the inherited property. However, then there may be Capital Gains Tax (CGT) implications.

Capital Gains Tax (CGT) is the amount that is taxed on an asset sold when the value of the asset has increased and a profit has been made. The property’s market value at the time it was inherited becomes the beneficiary’s starting cost for calculating capital gains tax. “Heirs need to be aware of this tax when they consider selling an inherited property as the value of the property may have increased if they hold onto it for a while before selling,” says Goslett.

Before making any decisions regarding an inheritance property, consult a qualified real estate professional who can assist you with conducting a comparative market analysis, rental projections, and strategic guidance tailored to the property’s location and condition.

Issued by Kesia Abrahams