Real Estate Investor Magazine South Africa September/ October 2019 | Page 31

What makes a good investment in the CBD
and things to check when doing your due
diligence:
It’s not often one finds a double win/ strategy of great rental
returns with above average capital growth. At the moment
Durban CBD is offering both.
When you take Durban’s world class attractions of the Golden
Mile Beachfront, year round climate, 2 hours’ drive to the Berg
& Bush, the vibrant people that make up the city and add the
Municipality is investing together with Private Sector you have
a perfect combination for great capital growth and a paradise
to live in…
CASE STUDIES:
PROPERTY ONE - (1 bed 54m2 apartment)
Purchase price
R300,000
Bond (assume 100% bond)
R3,000
Levy R1,000
Rates
R 200
Monthly cost
R4,200
Rental income
R5,000
Cash positive
R800 / month
ROI (Purchase Price of R300 000) 20% + Capital Growth
Net Return on Investment
Transfer and Bond Costs of R25,000 = 38.4%
+ Capital Growth (R800 profit or cash flow a month x 12 months
= R9600 / R25,000 outlay = 38.4%)
PROPERTY TWO - Rond Vista (Mahatma Gandhi Road/
Point Road)
Purchase price
R80,000 cash
Levy
R1,400
Rates (below the Municipal valuation) R0
Monthly cost
R1,400
Rental income R3,500
Profit is net 39%
ROI property has doubled in value in 18 months.
1. Financials – make sure the financials are under control
and the block is well managed, the financials can be
obtained from the Managing Agents or the Body
Corporate.
2. Body Corporate – is it active and on top of maintenance
in the block? Is there visible security with measures in
place to control overcrowding (Eg turnstiles or finger
print access).
3. Type of tenants in the building – are the tenants
mainly students? Do the tenants sub-let?
4. Working lifts – lifts must be in working condition
and well maintained in order for banks to lend in the
building. Good tenants won’t stay in a building where
they have to climb stairs. If the lifts need replacing you
need to plan for special levies.
5. Condition – look at paint work, spalling, pipes,
windows, common areas.
30 months to repay the Capital outlay of R80,000 –
assuming no rental escalation. (which reduces the risk factor).
This building is right in the area that the Municipality is
upgrading and on the drive into The Point Waterfront
Development and uShaka Marine World, which will see
constant demand from both tenants, investors and end users
alike.
The advantage of these priced investments is that one can
buy several to build a property portfolio, and achieve a far
higher return on investment and spread the risk. I.e. Instead
of buying one property for R1mil in a more affluent area, one
could buy 4 bachelor flats at R250,000 (remembering the
supply and demand favours the lower end).
KENDAL COWARD is a leading real estate
agent for RE/MAX in Durban, investor and
expert for inner city investments
SA Real Estate Investor Magazine SEPTEMBER/OCTOBER 2019
29