How about this for an outstanding investment?
The unit is 1 bedroom with an open plan kitchen and living area. It is 42m² in size, which is considerable when you consider that many of the 2-bedroom, 2 bathrooms flats currently on the market are between 49 and 52 m². This size allows the resident to separate the sleeping area from the rest of the apartment, which is very useful when socialising. The apartment is on the first floor and has a balcony that you can sit out on and enjoy the sun in winter because the apartment is north facing.
The pictures show that the entire apartment has a tiled floor, which makes cleaning it easy. The bathroom floor is also tiled as are the shower walls and parts of the walls outside the shower. Around the working areas in the kitchen area are tiled “splash back” areas as well as around the single basin sink. The fridge, double bed and 2-plate cooker shown in the pictures are included in the price.
The bedroom has plenty of cupboard space and can fit in a double bed and a desk. A desk is not part of the furnishings or included in the price.
As the picture of the kitchen area shows, there is an intercom connected to the gate and the resident can screen whoever wishes to visit. There is also a peep hole to see who is knocking on the door.
I have a 10-year forecast showing the forecast financial performance of the apartment as an investment. From this you can see the current income at R5 800 p.m. (which has been renewed for 2021) or R69 600 p.a. The expenses are R19 340 p.a. leaving a nett profit of R50 260 for the year. I have escalated the income at 6.5% p.a. and the expenses at 4.5% p.a., which is what is happening right now. The expenses are itemised in the notes below the spreadsheet. There are some points to be noted from this.
1. The net profit of R50 260 generates a net return on investment of 7.73%. This does not include the capital appreciation.
2. The property was bought in November 2004 for R349 000 and the transfer and bond costs were R34 000, giving a total investment of R383 000. This investment has grown to R650 000 over the following 15.5 years which means it appreciated at 3.48% per annum, compounded.
3. The total return on investment is, therefore, 11,21% and this is the net ROI. This is a good ROI.
4. Assuming that the net profit is used to pay for a bond, this would give a monthly amount of R4 188 which could go towards the bond. Based on an interest rate of 8% over 20 years, the R4 188 would finance a bond of R490 000. Based on a selling price of R650 000, this would mean you would have to pay in 650 – 490 = R160 000 plus the transfer and bond costs charged by the conveyancers.
Finally, if you buy the property now it is at a 7.73% ROI. If you decide to sell the property in 5 years’ time, the forecast tells us that your net profit will be R66 475. Assuming the person you sell to will also be happy with a ROI of 7.73%, the value of the apartment will be 66 475/0.0773 = R860 000. This would leave you with a capital gain of R210 000 after 5 years.
Now what do you think?
Phone me and let’s turn this incredible investment into reality for you. Remember, your income is secure until 30 November 2021!