This 1 bedroomed apartment in Vredehoek is on the market for R995 000 and is currently tenanted for R4 250. The ad states that the levies are R697 a month which means that net rental income is R3 553 a month. If one takes out a 100% bond the monthly payments are R13 102 per month, which means that the difference between the monthly payment and the rental income is R9 549 a month, nearly 2.7 times the net rental income itself! Here's the payment and yield graph:
Buying the apartment for cash yields a 4.29% return on investment, a good 6% below inflation. To break even on cashflow a massive 73% downpayment (over R725 000) is required, with a 50% downpayment still requiring 3.6% capital appreciation not to lose any money at all. Once rates, maintenance and vacancy are taken into account the yield is even less.
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