Property Exit Strategy Calculator
Compare all four exit options for your SA property: sell now, rent out, refinance for equity, or bequeath to heirs — with CGT, estate duty, rental yield and 10-year wealth projections
| Exit Option | Net Value / Cash | Key Cost |
|---|---|---|
Sell Now Commission + CGT + bond cancellation | R 619 000 | CGT: R 0 Commission: R 172 500 |
Rent Out Hold + let tenant pay bond | R -2 879/mo cash flow | Yield: 7.2% gross 5.4% net |
Refinance (cash out) Access equity, stay in property | R 200 000 | New bond: R 13 743/mo Extra/mo: R 664 |
Bequeath to Heirs Estate duty + CGT at death | R 800 000 | Estate duty: R 0 Heirs' base cost: R 2 000 000 |
Understanding Property Exit Strategies in South Africa Tax rules • 4 strategies • Example
The Four Exit Options
South African property owners approaching retirement, downsizing, or a life change face four main exit strategies. The best choice depends on your age, cash needs, tax position, and whether you have a surviving spouse.
- Sell now: Clean exit. Subject to CGT, agent commission, and bond cancellation costs. Net proceeds reinvested.
- Rent out: Retain the asset, generate income, continue capital appreciation. Subject to income tax on rental profit and CGT eventually.
- Refinance: Cash out equity without selling. New, larger bond; property retained. Useful for retirement income or other investments.
- Bequeath: Pass to heirs via estate. Subject to estate duty and deemed-disposal CGT at death, but heirs get a stepped-up base cost.
SA Tax Rules for Each Strategy
Primary residence exclusion: The first R2,000,000 of gain on your primary residence is excluded from CGT (R4,000,000 for a married couple who own jointly). Most South African homeowners pay zero CGT on their primary home.
CGT at death (Section 9HA): A person is deemed to have disposed of all assets at market value on the day of death. This triggers CGT. However, assets bequeathed to a surviving spouse are exempt from both CGT and estate duty under Section 4(q) — the estate essentially rolls over.
Base cost step-up: When heirs inherit property, their base cost for future CGT purposes is the market value at the date of death — not the original purchase price. This significantly reduces CGT when heirs eventually sell.
Worked Example — R2M Home, Age 58
Johann owns a Stellenbosch home worth R2,000,000. He paid R900,000 in 2010 and spent R100,000 on renovations. Bond balance: R1,200,000. It is his primary residence. Marginal tax rate: 36%.
Sell now: CGT: (R2M − R900k − R100k − R2M exclusion) = R0 gain — no CGT. Net proceeds: R2M − 8.625% commission (incl. VAT) − R8,500 bond cancellation − R1.2M bond = approximately R618,750.
Rent out: At R12,000/month gross yield = 7.2% gross. After 25% expenses: net yield 5.4%. Monthly cash flow (after bond): approximately R1,800 positive.
10-year winner depends on whether property appreciation (assumed 6%) beats investment returns (assumed 10% on sale proceeds). In this scenario, selling and investing wins by year 8 at 10% returns vs 6% appreciation.
Frequently Asked Questions
What is the best property exit strategy for retirement in South Africa?
There is no single best strategy — it depends on your income needs, tax position, and estate planning goals. For most retirees who own their primary residence outright (no bond), renting out generates regular income without triggering CGT. Selling makes sense if the capital can be invested to generate higher returns than the net rental yield. Bequest planning is most valuable when a surviving spouse is involved, as the Section 4(q) rollover eliminates estate duty and CGT.
How is CGT calculated when selling an investment property in South Africa?
Capital gain = selling price − base cost − capital improvements − R40,000 annual exclusion (no primary residence exclusion for investment property). The capital gain is multiplied by the 40% inclusion rate for individuals, then taxed at your marginal income tax rate. The effective maximum CGT rate is 18% (45% × 40%). For trusts the inclusion rate is 80%, making trust-held property far more expensive to sell.
What happens to property in a deceased estate in South Africa?
At death, the deceased is deemed to have disposed of all assets at market value (Section 9HA). CGT is calculated on the deemed disposal and forms part of the final income tax return. Estate duty (20% on estate value above R3.5M abatement) is then levied on the dutiable estate. However, property bequeathed to a surviving spouse is exempt from both CGT and estate duty under Section 4(q) — it rolls over to the spouse at the original base cost.
Can I refinance my property to access equity without selling?
Yes. South African banks allow refinancing (re-advancing) of a home loan to access built-up equity. Most banks will lend up to 70–80% of the current market value through refinancing. The cash-out proceeds are not subject to income tax or CGT as they are a loan, not a sale. However, the increased bond means higher monthly repayments. This strategy works well when the investment return on the cash-out exceeds the interest cost of the additional bond.
What is a base cost step-up and why does it matter for heirs?
When you inherit property in South Africa, your CGT base cost is reset to the market value at the date of death — not the original purchase price. This is called a base cost step-up. If you then sell the inherited property shortly after, there is little or no capital gain and therefore minimal CGT. This makes bequeathing property highly tax-efficient for heirs who plan to sell. The estate still pays CGT at deemed disposal, but the heir avoids double taxation on future appreciation.