So you’re thinking of buying an investment property? How about this 3 bed apartment in sunny Tamboerskloof on the market for a mere R1 690 000 and luckily it’s renting for R7 000/month till November 2011. Or rather it’s renting for R7 000/month gross, take away rates and levies of R1100/month the net rental income is R5 900/month.
Now with a purchase price R1 690 000 your monthly payment on a 100% bond is R15 205/month (and that’s with 30 year record low interest rates) and the difference between rental and bond payment is R9305/month, over 1.5 times the net rental. Added to that the transfer costs are R120 000, nearly 2 years (20 months to be exact) of net rental income!!!
Here’s the yield and cash flow graphs:
Right so if you put down the entire R1.69 million you can look forward to a max ROI of 4.19%, a ROI you’d get if you dumped all your money into a transmission account. To break even on cashflow a deposit of over a R1 000 000 is needed. Even putting down a hefty 50% deposit still requires 1.21% capital appreciation to not lose any money.
Original Post on Cape Town Property Bubble: Rent Vs Buy: Tamboerskloof – An ‘Asset’ Shouldn’t Cost You R9K/Month
