Rent Vs Buy: Gordon's Bay

Gordon's Bay is a nice place but the rent/price ratio that can be achieved there is pretty grim. Here's a 2 bed flat on sale for R650 000 that rents for R2 800 a month. That means if you took out a 100% bond the difference between the rent and the bond payments is just under 2 times the rent itself. Here's the payments and ROI you can expect:

Down Payment	Monthly Payment	Cash Flow	Annual Income	ROI	Cap. Appr. Required
R0	R8319.99	R-5519.99	R-66239.83		10.19%
R65000	R7487.99	R-4687.99	R-56255.84	-86.55%	8.65%
R130000	R6655.99	R-3855.99	R-46271.86	-35.59%	7.12%
R195000	R5823.99	R-3023.99	R-36287.88	-18.61%	5.58%
R260000	R4991.99	R-2191.99	R-26303.90	-10.12%	4.05%
R325000	R4159.99	R-1359.99	R-16319.91	-5.02%	2.51%
R390000	R3327.99	R-527.99	R-6335.93	-1.62%	0.97%
R455000	R2496.00	R304.00	R3648.05	0.80%	-0.56%
R520000	R1664.00	R1136.00	R13632.03	2.62%	-2.10%
R585000	R832.00	R1968.00	R23616.02	4.04%	-3.63%
R650000	R0.00	R2800.00	R33600.00	5.17%	-5.17%

If you pay for the property in cash you can expect just over a 5% rental return and that does not take into account rates, levies, maintenance and vacancy costs. A 70% percent deposit is required to break even on cash flow and if you put down a 50% deposit you'll need 2.5% capital appreciation just to not lose any money at all.