Rent Vs. Buy: Stellenbosch X 2

Out of nowhere there seems to be a rash of properties from Stellenbosch popping up (See examples one and two) with horrible price/rent ratios. And so to carry on the trend here's two more.

First up here's a 3 bed house in a security estate for sale for R1 215 000. It's currently renting for R5 000 a month (at least till November). If you bought it with a 100% bond the difference between the bond and the current rental is just over two times the rent. The ROI and payments are:

Down Payment	Monthly Payment	Cash flow	Annual Income	ROI
R0	R15551.97	R-10551.97	R-126623.67
R121500	R13996.78	R-8996.78	R-107961.31	-88.86%
R243000	R12441.58	R-7441.58	R-89298.94	-36.75%
R364500	R10886.38	R-5886.38	R-70636.57	-19.38%
R486000	R9331.18	R-4331.18	R-51974.20	-10.69%
R607500	R7775.99	R-2775.99	R-33311.84	-5.48%
R729000	R6220.79	R-1220.79	R-14649.47	-2.01%
R850500	R4665.59	R334.41	R4012.90	0.47%
R972000	R3110.39	R1889.61	R22675.27	2.33%
R1093500	R1555.20	R3444.80	R41337.63	3.78%
R1215000	R0.00	R5000.00	R60000.00	4.94%

A sub 5% ROI if you buy in cash (only 3.5% below inflation, that is if you believe governments figures in the first place) with a 70% downpayment required to break even. And this is the return before rates, maintenance and vacancy cost.

The second example is an interesting one. It's a 10 bedroomed student house for sale for R3 950 000, an 'opportunity for the investor' as the ad says. It currently rents out for R15 600 a month which means that if you bought it with a 100% bond the difference between the bond and the rent is 2.2 times the rent, nearly R35 000 a month. The rest of the payments and return of investment is as follows:

Down Payment	Monthly Payment	Cash flow	Annual Income	ROI
R0	R50559.91	R-34959.91	R-419518.94
R395000	R45503.92	R-29903.92	R-358847.05	-90.85%
R790000	R40447.93	R-24847.93	R-298175.15	-37.74%
R1185000	R35391.94	R-19791.94	R-237503.26	-20.04%
R1580000	R30335.95	R-14735.95	R-176831.36	-11.19%
R1975000	R25279.96	R-9679.96	R-116159.47	-5.88%
R2370000	R20223.96	R-4623.96	R-55487.58	-2.34%
R2765000	R15167.97	R432.03	R5184.32	0.19%
R3160000	R10111.98	R5488.02	R65856.21	2.08%
R3555000	R5055.99	R10544.01	R126528.11	3.56%
R3950000	R0.00	R15600.00	R187200.00	4.74%

A 4.74% return if you plonk down the entire asking price. Again a 70% downpayment is needed just to break even on the rental. The returns calculated here does not take into account rates, maintenance and vacancy and with this being a student house I bet the maintenance costs are a lot higher than what you could expect in a single tenant rental.