Here's a 2 bed apartment in Paarl for sale for R850 000 (R70 000 below market value the ad claims). It currently rents for R4 000 and if you take out a full bond the difference between the bond payments and rent is just over 2.5 times the rent itself. Here's the payment and ROI you can expect.| Down Payment | Monthly Payment | Cash Flow | Annual Income | ROI | Cap. Appr. Required |
|---|---|---|---|---|---|
| R0 | R10879.98 | R-6879.98 | R-82559.77 | 9.71% | |
| R85000 | R9791.98 | R-5791.98 | R-69503.79 | -81.77% | 8.18% |
| R170000 | R8703.98 | R-4703.98 | R-56447.82 | -33.20% | 6.64% |
| R255000 | R7615.99 | R-3615.99 | R-43391.84 | -17.02% | 5.10% |
| R340000 | R6527.99 | R-2527.99 | R-30335.86 | -8.92% | 3.57% |
| R425000 | R5439.99 | R-1439.99 | R-17279.89 | -4.07% | 2.03% |
| R510000 | R4351.99 | R-351.99 | R-4223.91 | -0.83% | 0.50% |
| R595000 | R3263.99 | R736.01 | R8832.07 | 1.48% | -1.04% |
| R680000 | R2176.00 | R1824.00 | R21888.05 | 3.22% | -2.58% |
| R765000 | R1088.00 | R2912.00 | R34944.02 | 4.57% | -4.11% |
| R850000 | R0.00 | R4000.00 | R48000.00 | 5.65% | -5.65% |
So a sub 6% ROI and that's before rates/levies, maintenance and vacancy costs. A 70% downpayment is required to break even on cash flow and even with a 50% downpayment you need 2% capital appreciation just to not lose any money at all.
There is also a R5000 a month rental subsidy offered, which is no doubt factored into the price and which you'll be paying back over 20 years. I bet that if nstead of a rental subsidy you ask for R60 000 off the asking price you'll get a quick 'no'. Everyone needs to protect their commissions.
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