Back in March we showcased this 2 bedroomed apartment in Mutual Heights in the Cape Town CBD which was on the market for R2 395 000 and had a rental income of R6 000 a month, meaning that if you bought the place in cash you'd be making 2% return on investment, only 8.5% below inflation. Sensing the turmoil in the property market the agents have dropped the price to R2 350 000, a massive 1.8% price drop! Needless to say it's still on sale. One thing I forgot in the previous analysis was to include the rates and taxes of R636 a month, so what I thought was R4 200 in net rental income is in fact only R3 567. We also need to take into account the increase in interest rates. There mere fact that the rent and selling price are so out of whack should have you running for the door of the estate agency already.If you bought this place with a 100% bond, the difference between the bond payment (R31 816 a month) and the net rental is R28 249 a month, 7.9 times the net rental! Ouch! For shits and giggles here's the payment and yield graph:
Sweet lord that is ABYSMAL. Paying for the entire purchase in cash will get you a whopping 1.82% return on income, which is only about 9% below inflation. To break even on cash flow requires a huge 88% downpayment, over R2 million!!! Putting down a 50% downpayment requires a 6.3% capital appreciation to not lose any money.
If you buy this place as an "investment" you might as well take your money, put it in a pile, pour petrol over it and set it on fire. This is the worst investment I've ever seen in Cape Town.
1 comment:
I see its been awhile since that post was made, so hopefully things have changed. I'm looking to rent/buy a 1bedroom loft apartment in Mutual heights. Would you suggest renting as opposed to buying?
Rapha
Post a Comment