First published in the Daily Maverick 168 weekly newspaper.

Answer:

Decisions like this are difficult because they are a combination of head and heart. It is nice to have your own place close to the grandchildren, but you also want to make sure that your investment gives you the best possible return.

I cannot answer the heart side of things, but I can highlight some of the financial factors you need to consider.

What is great is that you will be diversifying your assets geographically. It is seldom a good idea to have all your investments in one country like South Africa. You will also be earning an income in pounds, which is great if the rand continues to depreciate.

On the downside, you need to determine how many nights a year you can realistically expect the property to be occupied, given the impact of Covid-19. This will affect the possible income. Basic running costs and property taxes will need to be paid regardless of occupancy rates.

Be careful of putting too many of your assets into one asset class. Remember, there are different classes of asset, like shares, property and cash. They all grow at different rates, depending on the state of the economy.  

If you have all your eggs in one basket (in this case a foreign property), it can affect your wealth if that asset class does not perform.

You have adult children, so you are at the stage in life where you need to put structures in place to manage your estate and make it easy to transfer wealth to your children and grandchildren.

Owning a foreign property can cause delays here. Executors only work off original wills, so your South African assets can only be dealt with once your offshore assets have been finalised. (Tip: If you own foreign assets, it may be an idea to have separate wills for offshore assets and local assets.)

You also need to consider how easy it would be to sell the property should your needs change. The various costs, legal fees and taxes need to be taken into account when evaluating the investment.

Though this may not be the case in Britain, many countries do not offer freedom of testation, in which you can leave an asset to someone in your will. There are often specific succession and inheritance tax laws thatmay result in you not being able to pass on assets in the way in which you would like.

It is always a good idea to seek independent professional advice to ensure that you are covered when it comes to probate and sites tax.

If you are looking to diversify your assets by investing offshore, consider going a simpler route by investing in an offshore investment plan. These are offered by the international arms of many of the large life insurance companies.

There are a number of advantages here:

• It is tax efficient and you know where you stand in terms of income tax;
• You can make your children the beneficiaries of ownership, thus creating an offshore nest egg for the family;
• It is an easy investment to liquidate;
• Your estate duty would only be 20%;
• You do not have any issues with regard to probate, so the wrapping up of your estate will be a lot simpler; and
• There are no executor fees payable on the investment.

If you go this route instead of buying a property, you can remove funds from this investment and hire an Airbnb near your children for when you go to stay.

I have given you the logical answer, but there is something to be said for having a place close to the family and the convenience of being able to stay there for an extended period.

This is where your head and your heart must duke it out.  Is this a second home or is it an investment?

If you go the route of buying the property, make sure you have the right structures in place and ensure you have a will to cover your foreign assets. DM168

This story first appeared in our weekly Daily Maverick 168 newspaper which is available for free to Pick n Pay Smart Shoppers at these Pick n Pay stores.