Rent Vs Buy: Diep River - Great Opportunity To Lose Money

Here's a 2 bedroomed flat in Diep River on sale for R925 000 with a current rental of R4 800. "GREAT OPPORTUNITY FOR INVESTORS!" shouts the ad. That means with a 100% bond you'll be losing R7 723 every month, which is about 1.6 times the gross rental income. Here's the payment and yield graph:



So paying in cash gets you 6.23% return on investment a good 6% below inflation. With a 50% deposit you still need capital appreciation of 1.9% to not lose any money and to get cash flow positive on the rental income alone requires a 61% downpayment of over R570 000. Take into account ownership cots: rates, levies, maintenance and vacancy and returns are even less.