It's quite rare to find a property in the Waterfront that's both for sale and if need be for rent but the Cape Town property market has yet to disappoint. Now usually the folks who can afford to buy in the Waterfront don't worry about rental returns and all that money stuff us peasants have to keep in mind but even in this area the rent/bond payment ratio is still out of whack.Here's a 2 bedroomed apartment at the Waterfront (described as an "Established lettings business") going for R8 500 000 (although that price seems a bit high to me) but it's also available for rent at R30 000 a month. If our intrepid investor came along and bought the place for the asking price here's your ROI:
| Down Payment | Monthly Cash Flow | ROI |
|---|---|---|
| R1000000 | R-57868 | -69% |
| R2000000 | R-46152 | -28% |
| R3000000 | R-34437 | -14% |
| R4000000 | R-22721 | -7% |
| R5000000 | R-11005 | -3% |
| R6000000 | R711 | 0% |
| R7000000 | R12426 | 2% |
| R8000000 | R24142 | 4% |
Barely breaking even with a whopping R6m downpayment and 4% interest ROI after buying the place in cash? If you've got that kind of many to spend then you've also got investment vechiles that get better returns. But let's say you manage to negotiate a whopping 30% discount and buy the place for an even R6 000 000, then your ROI is:
| Down Payment | Monthly Cash Flow | ROI |
|---|---|---|
| R1000000 | R-28579 | -34% |
| R2000000 | R-16863 | -10% |
| R3000000 | R-5147 | -2% |
| R4000000 | R6568 | 2% |
| R5000000 | R18284 | 4% |
| R6000000 | R30000 | 6% |
6% return? That's only 3% less than a fixed deposit! And get this, the place has a daily rental of R1500 but even if it was 100% occupied for an entire year and you bought the place at R6m you would still only be making 9% ROI a year. I'll take two!
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