OFFSHORE
investment . This means :
• A 30 % deposit is required in cash , amounting to R1.8 million .
• The remaining 70 % is financed through a mortgage , totalling R4.2 million .
Bond and transfer costs compared equates to a saving of R200 000 for Chapmans yard .
Property Running costs Now , let ' s look at the overall running costs , which include bond repayments , levies , rates , and rental management fees :
• • Chapmans Yard in the UK
• Overall running cost : R31,500
• • Sea Point in South Africa
• Overall running cost : R53,500
Despite higher interest rates in the UK , they remain lower than those in South Africa . Initially , both properties show negative cash flow , but as rentals increase and interest rates lower , this can shift into positive territory . Additionally capital growth begins the day you own the property .
Property Rental Returns and Shortfalls Expected rental returns and the corresponding shortfalls for both properties :
• Chapmans Yard in the UK Rental return : R30,000 Shortfall : -R504
• Sea Point in South Africa Rental return : R35,000 Shortfall : -R18,500
These figures illustrate the difference in rental income between the two properties , with Sea Point initially having a higher rental return . However , when factoring in the associated costs , Sea Point experiences a larger monthly shortfall compared to Chapmans Yard in Birmingham . This further highlights the potential financial advantages of investing in the UK property market , considering cost savings and the goal of building wealth in Pounds .
The bottom line here is the shortfalls , which provide a clear picture of what you can anticipate from the very beginning of your property ownership journey . While these figures initially show a negative cash flow , it ' s important to note that as rental income increases over time and interest rates reduce , these figures are likely to transition into positive monthly cash flow . Rentals have increased by 40 % in
131 SEPT / OCT 2023 SA Real Estate Investor Magazine