Here's a 3 bedroomed 119m2 apartment in the City Bowl on sale for R2 100 000. That means with a 100% bond you can expect to pay R18 884/month.It also rents for R9 500/month which also means you can expect to lose at least R9 394/month covering the difference between the rent and the bond payment. Take into account rates, levies and maintenance and you're probably losing well over R10 000 a month.
Let's take a look at the yield and payment graph and table:
| Down Payment | Monthly Payment | Cash Flow | Annual Income | ROI | Cap. Appr. Required |
|---|---|---|---|---|---|
| R0 | R18894.25 | R-9394.25 | R-112730.94 | 5.37% | |
| R210000 | R17004.82 | R-7504.82 | R-90057.85 | -42.88% | 4.29% |
| R420000 | R15115.40 | R-5615.40 | R-67384.75 | -16.04% | 3.21% |
| R630000 | R13225.97 | R-3725.97 | R-44711.66 | -7.10% | 2.13% |
| R840000 | R11336.55 | R-1836.55 | R-22038.56 | -2.62% | 1.05% |
| R1050000 | R9447.12 | R52.88 | R634.53 | 0.06% | -0.03% |
| R1260000 | R7557.70 | R1942.30 | R23307.62 | 1.85% | -1.11% |
| R1470000 | R5668.27 | R3831.73 | R45980.72 | 3.13% | -2.19% |
| R1680000 | R3778.85 | R5721.15 | R68653.81 | 4.09% | -3.27% |
| R1890000 | R1889.42 | R7610.58 | R91326.91 | 4.83% | -4.35% |
| R2100000 | R-0.00 | R9500.00 | R114000.00 | 5.43% | -5.43% |
Unless you put down at least a cool million you aren't breaking even on cash flow and paying in cash gets you 5.43% ROI. And that's before expenses are taken into account.
11 comments:
A colleague of mine who is that almost mythical creature - an honest and ethical builder - told me that City Bowl replacement value for flats (with good quality modern finishes) is R11k a square meter. Add on a premium for block perks (parking, location, functioning body corporate, etc) and you're looking at an absolute maximum price of R15,000 per square meter. In other words, maximum realistic prices at the moment for renovated, super-spanky pads are R1.5m for a large 2-bed, R1.1m for a large 1-bed, R900k for a small 1-bed, and R750k for a studio.
Using that yardstick this seller needs to drop his asking by 15% just to enter the bounds of reality.
FYI, the ad indicates 119m^2, not 199m^2. Otherwise 2.1 million doesn't sounds that bad :)
Whoops! Fixed it. Thanks.
Since Jan 2011, I have already recieved 6 emails from Pam Goldings alone notifing me of price reductions in the Cape CBD area.
28 Jan Was R950k Now R850k
18 Feb Was R1.35mil Now R1.25mil
23 Feb Was R1.4mil Now R1.295mil
8 Mar Was R1.35mil Now R1.195mil
9 Mar Was R775k Now R650k
10 Mar Was R1.17mil Now R1.13mil
Could this be the end of the bull trap and the start of the bubble burst?
This is a super price and a real SNIP! So get out your cheque books and start scribbling down offers NOW!
hahahaha @ Wendy
Without the carrot of future strong house price growth, putting down cash of that magnitude for a terrible yield property doesn't make any sense as an investment v other options.
Fine as a place to live though. Maybe the buyer should go armed with the Jean-Paul Rodrigue model as a bargaining tool!!
If you have cash in your bank and dont know what to do with it, best to invest it in a property to let out. Banks can go bankrupt at anytime (especially with the corruption that is going on and getting worse) and you will always find something to rent your property.
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