Here's a 1 bed apartment for sale in Long Street on the market for R1 195 000. It's tenanted till January 2011 at R4500/month. Rates and levies total R1441/month leaving a net rental of R3059/month. A 100% bond will require a monthly repayment of R11532/month meaning that the monthly shortfall is R8473/month, nearly 3 times the net rental! Here's the yield graph:
| Down Payment | Monthly Payment | Cash Flow | Annual Income | ROI | Cap. Appr. Required |
|---|---|---|---|---|---|
| R0 | R11532.01 | R-8473.01 | R-101676.10 | 8.51% | |
| R119500 | R10378.81 | R-7319.81 | R-87837.69 | -73.50% | 7.35% |
| R239000 | R9225.61 | R-6166.61 | R-73999.28 | -30.96% | 6.19% |
| R358500 | R8072.41 | R-5013.41 | R-60160.87 | -16.78% | 5.03% |
| R478000 | R6919.21 | R-3860.21 | R-46322.46 | -9.69% | 3.88% |
| R597500 | R5766.00 | R-2707.00 | R-32484.05 | -5.44% | 2.72% |
| R717000 | R4612.80 | R-1553.80 | R-18645.64 | -2.60% | 1.56% |
| R836500 | R3459.60 | R-400.60 | R-4807.23 | -0.57% | 0.40% |
| R956000 | R2306.40 | R752.60 | R9031.18 | 0.94% | -0.76% |
| R1075500 | R1153.20 | R1905.80 | R22869.59 | 2.13% | -1.91% |
| R1195000 | R0.00 | R3059.00 | R36708.00 | 3.07% | -3.07% |
Just to break even on cashflow will require a deposit of R878 000, over 70% of the selling price and paying full price in cash will get you a return on investment of 3%.
12 comments:
Could it be that these types properties are only purchased by those that can afford 100% up front?
Anonymous, one would think those types who can afford 100% up front would want to do a bit better than 3%! if they dont, they wont be able to afford 100% for very long.
Not that many things you can put your money into that will be sure to deliver even 3% these days. Hard assets like houses seem like a surer bet than paper investments like stocks though. Or as a financial advisor told me recently "we see the stockmarket going sideways for the next few years".
Hi, could someone please let me know where I could learn more about property yield graphs?
How to read them and how to create ones own?
Any web links are appreciated. Thanks
@anon2 - really? you don't see many things that will deliver over 3%? Are you really saying that?
1) go into any high street bank
2) ask for the simplest savings account
3) get MINIMUM 6% on your money
4) admire lobotomy scars in the mirror while you wait to open the account.
Excellent info. However I think this is an extreme example, and slightly misleading as an indication of the market. What this might serve to prove is that possibly the city bowl holds a low ROI, whilst other suburbs are better investments?
What would be cool, is a graph showing the ROI per year / per suburb. I take it since Parklands is holding strong as one of the fastest growing suburbs in the country, maybe that indication is directly proportional to the highest investment ROI.
to the last anon
Parklands? you must be kidding? check out the sheriffs auctions. at least half of them are parklands properties, all buy to let disasters that the owners cant even give away.
@ Parklands Anon, I don't have any graphs but I do have some horror stats for your for Parklands, courtesy of a Lightstone report I bought. I hope you're sitting down and that the kids are in bed.
Average achieved selling price of freehold properties:
2007: R847,000
2008: R828,000
2009: R822,000
Average achieved selling price of flats:
2007: R538,000
2008: R535,000
2009: R467,000
Number of sales (freehold)
2004: 1463
2009: 348
Number sales (flats)
2004: 1306
2009: 144
Anyone who told you that Parklands is booming was on crack. It was as close as we've come in the Western Cape to a Las Vegas-style property rush, where thousands of middle- and low-income suckers believed that rubbish about getting onto "the ladder" and bought badly made shoeboxes on a sandblasted plain miles from anywhere.
I drove through there recently and see it has become the address of choice for middle-class Nigerians, mostly self-respecting folk trying to get a leg up in the world. If you're willing to be a landlord for an emigrant community (with all the admin nightmares that entails, trying to track down ID documents, trying to track down tenants who are somewhere between Cape Town and Lagos owing you 6 months rent) then good luck to you. If not, sell now and lick your wounds.
@ Anon 4
I meant inflation + 3%. You have heard of this thing called inflation, right?
so where do you get the extra income to cover inflation from genius? if you are earning 3% then thats what you earn, doesnt matter what inflation is, you still only get 3%.
well it does matter what inflation is really, but you know what i mean, i am sure.
and regarding "hard assets" being a surer bet, speak to a Zimbo farmer on that one.
You're right, it's all fucked.
Buy Gold, silver, guns or canned beans. Everything is up the spout.
I can't believe how cheap the rent is. Wish I could find a flat like this in CT for that rent right now.
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