Here's a house in Plattekloof on sale for R3 395 000 with a rental income of R18 000 (despite the ad saying it's newly built and looks empty). That means with a 100% bond the difference between the monthly bond payment of R45 964/month and the rent is R27 964/month. If you're fully geared you'll be losing over R335 000 every year! Here's the payment and yield graph:
So paying for the place in cash gets you a mediocre 6.36% return on investment, about 6% below inflation. With a 50% deposit you still need 1.76% capital appreciation to not lose any money at all and to break even on cashflow requires a deposit of over R2 000 000! Who would've thought it would have worse returns than a flat in Ocean View Drive. Once costs are taken into account such as maintenance, vacancy and rates the returns are even worse.
1 comment:
this house is very overpriced. R2m and it would be sold
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