Rent Vs Buy: Diep River - Great Opportunity For Suckers

This 2 bed apartment in Diep River ("
GREAT OPPORTUNITY FOR INVESTORS!" shouts the ad) is on sale for R925 000 and is tenanted till April 2009 at R4 800 a month. With a 100% bond the difference between the rent, and the R12 523 bond payment is R7 723 a month, 1.6 times the monthly rent itself. Here's the rental and yield graph:




So if you buy the place in cash you can expect a 6% ROI (about 5% below inflation and 7%-8% below just leaving your money in a fixed deposit). With a 50% deposit you still need 1.9% capital appreciation to not lose any money and you'll only break even on cash flow with a 61% downpayment. Factor in ownership costs like levies, rates, maintenance and vacancy and your returns are even less. What an opportunity. I'll take two!