Townhouse for Sale - 2Bed/1Bath/1 Structural Parking

Townhouse for Sale - 2Bed/1Bath

Selling 2/1 Townhouse with existing up to date tenant in place. Lot's of demand for rentals in area.

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Financials

Acquisition Cost: R620,000

Capital Employment: R123502

Net Cashflow Year 1: R-30/m

Net Cashflow Year 2: R132/m

Net Cashflow Year 3: R301/m

Internal Rate of Return (IRR Year 5): 15.3%

 

Investment Case

  • Cash Deal, or
  • Mortgage Sale, or
  • Instalment Sale Deal (No bond required)

101 Windmills

2 Bedroom, 1 Bathroom apartment is located in the established complex called Windmills, Bucclue in Sandton close to Woodmeed Shopping Centre Hub and Mall of Africa Business Hub, Midrand. It has an open-plan kitchen and living area which leads onto the balcony. The property is tiled and has a bath and shower in the one bathroom with a toilet and basin. Both bedrooms have built-in cupboards. The property has one coved structural carport with ample open parking for visitors. The complex has a large billboard advertisement which helps to keep levies low. The complex is well-maintained with 24hour security. The complex is well maintained and is close to all amenities and schools. It is a stone through away from public transport points. At 48m2 this apartment is ideal for a young working couple and for this reason, finding a tenant is always a breeze. The unit has a current tenant with an excellent credit score who is currently paying R5850 rent per month plus water, sewer, and electricity. There is currently no rental agent appointed and the tenant is invoiced monthly by the owner with the Rentbook free software.
This property is available with an Instalment sale agreement. No bond finance is required. The property deal requires an upfront investment of R123 502 and has a negative cash flow of only R30 per month in year one and a positive cash flow of R132/m in year two and R 301/m in the third year. Assumptions are that the investor will self-manage the property with the Rentbook free software. If preferred the property can also be managed by Preferental.com for a monthly fee of 4.7% and this offers the following benefits for peace of mind:

  1. Lease agreement (R650 charged to the tenant)

    • Property inspections (App)

    • All management features

    • Rent paid on the 1st

    • Four month's rental cover

    • One-month property damage

    • Professional lawyers

    • All legal fees for eviction

    • Eviction process

    • Sheriff cost for eviction

     
What is gross yield in property?
  • Gross yield is a quick check to see if a property is likely to be a good investment without considering the cost of the property. You look at the total rental income received from the tenant of a property divided by the sale price. It is calculated by expressing the annual rental income earned from a property as a percentage of how much the property cost. A general indication of a property worth investigating further is a gross yield higher than 10% and ideally closer to 15%
Example
  • Property purchase price:R2 000 000
  • Annual rental income or “yield”: R140 000
  • (R140 000 divided by R2 000 000 ) x 100 = 7%
  • Gross Yield:7.0% per annum
What is net yield in property?
  • Net yield is the yield after paying for any costs relating to that income such as management fees, municipal rates, levy, homeowners association fees, repairs and maintenance. Typically the “net yield” is used for the purposes of the ROI calculation.
What are rental escalations?
  • A rental escalation refers to when the property owner increases the rental charged to the tenant occupying the property. These escalations typically take place on an annual basis and result in an increase in the rental yield on the property.
What is capital growth?
  • Capital growth (also called capital gain) is the increase in the value of a property over time. It is the difference between the purchase price/cost and the sale price of the property.
Example
  • Property purchase price on 1 January 2020:R2 000 000
  • Property sales price on 1 January 2022:R2 500 000
  • Capital growth: R500 000
Capital Growth vs Yield – which is more important?
  • Both capital growth and yield are important considerations in any property investment. These two variables tend to move in opposite directions to one another:
  • A property with high capital growth expectations typically has a lower yield (eg. an apartment in Camps Bay); whereas a property with a higher yield typically has lower capital growth expectations (eg. an apartment in the Johannesburg CBD)
  • Investors seeking higher disposable income may have a preference for higher-yielding property investments with higher rental income.
  • Investors with a longer-term view may be prepared to accept lower yields in exchange for greater capital growth in the longer term
  • It is important to note that Capital Gain is never a guaranty and the prices of properties in any area can experience low growth or even negative growth over certain periods.

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The estimate returns on the iBuyProperty platform is based on various factors and does not mean that any amount can be guaranteed. Past performance is not necessarily an indication of future performance.