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Thread: Property investment - struggling to find good returns

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    Property investment - struggling to find good returns

    Hi all,

    I've been shopping around for some new buy-to-let property investments.

    I've cased about 40 different properties in JHB northern suburbs and set up a comparison spreadsheet and all of them have a shortfall i.e rental doesn't cover the bond + expenses.

    The properties I've been targeting are 2 bedroom apartments in the 900k - 1.2m range, they typically rent for between 8k-12k. After paying bond, interest, rates, levies, maintenance and management fees I have to bankroll an extra R1000 (roughly). Oh and this is based on a 20% down payment.

    Is it possible to find positive cashflowing properties from day one or is this shortfall the norm?

    It's a bit frustrating because I don't want to buy liabilities and don't want to speculate on capital gains, I want positive cashflowing properties and can't find them.

    Any real estate people out there experiencing the same thing?

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    Site Caretaker Dave A's Avatar
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    The feedback I'm getting from the local property market is "there's a shortage of stock". From experience, that most often does not mean there's a lack of property available on the market; it means there's a shortage of property of the type that is in demand and is appropriately priced to sell! Your findings pretty much reflect much the same thing, I guess.

    To some extent it's probably being driven by both sides of the equation - sellers are still expectant of at least inflation linked price increments, while investor purchasers have had two .25% increases in interest rates to accommodate in their viability calculations, which requires a capital cost reduction to compensate when all other elements are equal.

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    Diamond Member Justloadit's Avatar
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    Another issue to take into consideration, with the new building regulations with respect to insulation and alternative water heating energy, the cost to build a new home far surpasses the same type of already built home.
    So existing homes cost will creep up as they will be more in demand as they fall under the previous building codes.
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    Everything seems over priced to me, in some suburbs you can rent a 4 million rand penthouse for 25k/month, its better off to just rent and invest the surplus in your own business.

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