Townhouse for Sale - 2BR/1BA

Townhouse for Sale - 2BR/1BA

Parents selling 2/1 Townhouse used by their child in colledge town. Lot's of demand for rentals in area.

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Financials

Acquisition Cost: R400,000

Capital Employment: R40,000

Net Cashflow: R1,400/m

Net Rental Yield (ROI): 6.5%

Discount Equity: R180 000

Internal Rate of Return (IRR): 10.3%

Investment Case

  • Buy-To-Let (Mortgage Sale)
  • Buy-To-Let (Instalment Sale)
  • Flip Opprotunity
2 Bedroom, 2 Bathroom apartment is located in the established complex called Villa Dorado in Heuweloord, Centurion. It has an open-plan kitchen and living area which leads onto the large balcony with a spectacular view. The property is tiled throughout and has a bath in the one bathroom with a toilet and basin and a shower, toilet, and basin in the second bathroom. Both bedrooms are also tiled and have built-in cupboards. The property has one coved carport with ample open parking for visitors. The complex does not feature a pool area which keeps the levy within budget. The complex is well maintained and is close to all amenities and malls. It is a stone through away from Forest Hill Mall. At 77m2 this apartment is bigger than most other new units in the area and for this reason, finding a tenant
This property is available with an Instalment sale agreement. No bond finance is required. The property deal requires an upfront investment of R144500 and has a negative cashflow of R273/m in year one and R 87/m in year 2. From year 3 it is cash flow positive and the tenant will pay the full cost of the property. Assumptions are that the investor will make use of Preferental.com to manage the property on a month to month basis and the cost of Preferental.com is priced in the investors' spreadsheet. Preferental.com 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.