27 March 2011

Sunday Open Thread

Too much sport, too many beers, too little time to post an open thread.

12 March 2011

09 March 2011

Rent Vs Buy: City Bowl - R1 000 000 Invested = 0% Return

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 PaymentMonthly PaymentCash FlowAnnual IncomeROICap. Appr. Required
R0R18894.25R-9394.25R-112730.945.37%
R210000R17004.82R-7504.82R-90057.85-42.88%4.29%
R420000R15115.40R-5615.40R-67384.75-16.04%3.21%
R630000R13225.97R-3725.97R-44711.66-7.10%2.13%
R840000R11336.55R-1836.55R-22038.56-2.62%1.05%
R1050000R9447.12R52.88R634.530.06%-0.03%
R1260000R7557.70R1942.30R23307.621.85%-1.11%
R1470000R5668.27R3831.73R45980.723.13%-2.19%
R1680000R3778.85R5721.15R68653.814.09%-3.27%
R1890000R1889.42R7610.58R91326.914.83%-4.35%
R2100000R-0.00R9500.00R114000.005.43%-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.

05 March 2011

Saturday Open Thread

It's the Saturday Open Thread. This week's topic (not that you people ever follow it) is the 'renovation premium'.

Given a renovation that cost X how much more than X should you be expected to pay when buying a property that has been renovated by the previous owner.

03 March 2011

Dear Agents: Please Try Harder - Show Houses

Reader KS writes:
Agents want to know why things aren't selling? Perhaps they should look at the effort they put into show houses. Supposedly it's the best way to sell a house but of the 4 show houses I went to on Sunday, 3 were staffed by house "sitters" who had no knowledge about the place. This was a typical conversation:

Me: How many metres under the roof
Sitter: Shoo... not sure... going to have to ask the agent cos he said the pamphlet was wrong...
Me: When was the kitchen renovated?
Sitter: Ja I don't know...
Me: How long has this been on the market?
Sitter: Can't say..
Me: Is there plumbing for a downstairs bathroom?
Sitter: *silence*

Agents, if you want to sell, then get off your asses and start sitting in show houses or at least put knowledgeable people in there not brain dead idiots. I don't have the time to come back during the week just to get answers. To quote Glengarryglenross: First prize is a cadillac, second prize is a set of steak knives, third prize is you're fired.
KS sent me a link to where that quote is from. Estate Agents should be watching it every day to pump themselves up.