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Buying low cost property for rental...whats your take?
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Angelica _ann
#21 Posted : Thursday, May 22, 2014 4:51:15 PM
Rank: Elder

Joined: 12/7/2012
Posts: 11,935
KulaRaha wrote:
Mucene wrote:
Gordon Gekko wrote:
30% taxes on rental income.......


That's for non-resident taxpayers. Residents are taxed at the graduated rates just like income tax on salaries.


I am a resident, and will deduct interest as an expense.



I think where GG is coming from at 156k per month, regardless of what expenses and deductions you create/come up with, it is highly that you will be at the upper bracket of taxation.
In the business world, everyone is paid in two coins - cash and experience. Take the experience first; the cash will come later - H Geneen
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jawgey
#22 Posted : Thursday, May 22, 2014 5:14:29 PM
Rank: Member

Joined: 1/13/2014
Posts: 398
Location: Denmark
Angelica _ann wrote:
KulaRaha wrote:
Mucene wrote:
Gordon Gekko wrote:
30% taxes on rental income.......


That's for non-resident taxpayers. Residents are taxed at the graduated rates just like income tax on salaries.


I am a resident, and will deduct interest as an expense.



I think where GG is coming from at 156k per month, regardless of what expenses and deductions you create/come up with, it is highly that you will be at the upper bracket of taxation.

ofcos the rental income will be at the 30% bracket since am sure other incomes eg employment income will have covered the other part of the graduated scale.
Seeing is believing
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Gordon Gekko
#23 Posted : Thursday, May 22, 2014 5:20:11 PM
Rank: Elder

Joined: 5/27/2008
Posts: 3,760
KulaRaha wrote:
Mucene wrote:
Gordon Gekko wrote:
30% taxes on rental income.......


That's for non-resident taxpayers. Residents are taxed at the graduated rates just like income tax on salaries.


I am a resident, and will deduct interest as an expense.


You need to be smart about it, for an individual mortgage relief on interest expenses is a maximum of ksh 150,000 per year, which is certainly a lot less than interest payments for a ksh 20M mortgage. You can get round this by forming a company to own the property.
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KulaRaha
#24 Posted : Thursday, May 22, 2014 6:03:37 PM
Rank: Elder

Joined: 7/26/2007
Posts: 6,514
I have incorporated an SPV just for this. The bank has been given comfort via a guarantee from me.
Business opportunities are like buses,there's always another one coming
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Angelica _ann
#25 Posted : Thursday, May 22, 2014 6:25:40 PM
Rank: Elder

Joined: 12/7/2012
Posts: 11,935
So when you do flats/apartments, you are better off with a ltd co. than holding the title under individual name or joint ownership!
In the business world, everyone is paid in two coins - cash and experience. Take the experience first; the cash will come later - H Geneen
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jawgey
#26 Posted : Thursday, May 22, 2014 9:44:24 PM
Rank: Member

Joined: 1/13/2014
Posts: 398
Location: Denmark
Angelica _ann wrote:
So when you do flats/apartments, you are better off with a ltd co. than holding the title under individual name or joint ownership!


Most definitely! esp now with itax .. KRA itanasa landlords wengi.. plus you get to enjoy capital deductions.
Seeing is believing
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Angelica _ann
#27 Posted : Friday, May 23, 2014 8:04:35 AM
Rank: Elder

Joined: 12/7/2012
Posts: 11,935
jawgey wrote:
Angelica _ann wrote:
So when you do flats/apartments, you are better off with a ltd co. than holding the title under individual name or joint ownership!


Most definitely! esp now with itax .. KRA itanasa landlords wengi.. plus you get to enjoy capital deductions.


Kindly expound ... simple language?
In the business world, everyone is paid in two coins - cash and experience. Take the experience first; the cash will come later - H Geneen
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Gordon Gekko
#28 Posted : Friday, May 23, 2014 3:38:50 PM
Rank: Elder

Joined: 5/27/2008
Posts: 3,760
Angelica _ann wrote:
jawgey wrote:
Angelica _ann wrote:
So when you do flats/apartments, you are better off with a ltd co. than holding the title under individual name or joint ownership!


Most definitely! esp now with itax .. KRA itanasa landlords wengi.. plus you get to enjoy capital deductions.


Kindly expound ... simple language?


At its simplest:

You build (not buy) a block with ksh 1 million
Your income from the block is 200,000 per year
Your tax is 30% of 200,000 = 60,000

Capital deductions per year is 1 million/40 = ksh 25,000
Your tax, if you claim capital deduction is 30% of 175,000 = 52,500

So, you save ksh 7, 500 tax (60,000 - 52,500) each year for 40 years

terms and conditions apply.
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Angelica _ann
#29 Posted : Friday, May 23, 2014 5:16:24 PM
Rank: Elder

Joined: 12/7/2012
Posts: 11,935
^thanks!
In the business world, everyone is paid in two coins - cash and experience. Take the experience first; the cash will come later - H Geneen
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kendata26
#30 Posted : Saturday, May 24, 2014 12:35:48 AM
Rank: New-farer

Joined: 5/30/2013
Posts: 56
Location: Mini Apple
dunkang wrote:
a4architect.com wrote:
@kendata26, how are you arriving at returns of 3% for the 28m cost?

Am not @Kendata26 but i can help explain.
Assuming that you bought the property for KES 20M.
Also, assuming your rental income for 15 years is KES 28M.
Now, the gross profit for the entire 15 years is KES 8M. That is, KES 0.533M annually.

This translates to 2.67% annually (on gross rental income).


Pole for missing in action. Weather in my hood has finally turned so I've been outside enjoying it!

@Dunkang explained it well. Assuming the cost of the unit goes up, the returns will be better than this and make the price reasonable (i'm assuming the price of buildings appreciates similar to plots in Nairobi).
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