Investors Exit The Market

I think we'll start seeing a lot more ads like this one. Here's an ad from an investor unloading his entire portfolio of 18 properties all over the Cape ("Noordhoek to Grabouw") for R7 000 000. The properties have a "potential rental" of R46 000 a month, which either means they are currently renting for less than that or some properties are sitting vacant. According to my calculations if you achieve that "potential rental" and you want to be cash flow positive you'll need to put down at least R3 500 000. It must be a great feeling 'investing' R3 500 000 and not actually making any money. I also doubt that R46 000 rental includes rates, levies and other ownership costs.

This 2 bed apartments in Noordhoek seems to be one of the apartments they're trying to sell off. It's for sale for R615 000 and has a gross rental of R3 000. Here's the yield and payment graph.

Paying in cash yields a 5.85% return on investment, with a 63% downpayment needed to break even on cash flow. Just to not lose any money at all with a 50% downpayment requires just over 2% capital appreciation. Again this is before rates, levies, maintenance and vacancy costs.