Here's a two bed apartment in Blouberg on the market for R1 590 000 (for "Investors" only the ad says, good way to exclude 95% of the property purchasing public out there) and renting out for R8 000 a month with a 10% escalation to R8 800 set to kick in in April 2009. Levies are R1 500 a month which means that the net rental income will be R7 300 a month. With a 100% bond the difference between the monthly bond payment of R21 526/month and the rental income is R14 226, nearly twice the rental itself. Here's the payment and yield graph:
So buying the place in cash gets you a terrible 5.51% return on investment, about 6%-7% below inflation. To break even requires a 66% downpayment of over R1 000 000 and with a 50% downpayment you still need 2.61% capital appreciation to not lose any money at all. Returns will also be less once rates, maintenance and vacancy are taken into account as well.
2 comments:
R8000 per month for a two bedroom flat in Blouberg? That's insane. I am renting a similar flat in Royal Ascot for half that. A sea view can't possible cost 50% of the rent, can it?
Perhaps it's the extra 45 minute commute to town that's worth the extra rent?
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