The Developer Journal Issue 3 | Page 48

I N V E S T & d e v e l O P The calculations The table below compares similar developments in different cities along with some key factors. Note that the exchange rate used for the UK investments is R17.40 to the Pound. Purchase Purchase price Deposit – SA 10% | UK 20% Bond Interest Rate Monthly installment Monthly rental Potential rental p.m. Profit / (Loss ) over first year Years to break even Taking it abroad Investing in property abroad is not as complex as you may think. There are a host of specialist companies that can assist in all aspects of investing abroad – from the initial research and acquisition through to management and even exit strategies. Nightly rental Potential nightly Nights to break even Annual revenue at 80% capacity Profit / (loss) over first year Capital growth – after 5 years Average growth in area Balance on bond Potential value of property Possible leverage Regarding Airbnb and similar short-term rental services, the city of London has already implemented regulations that limit the number of nights to 90, along with an additional council tax. Manchester has not yet implemented any regulations but, as we see locally, change is imminent. Assumptions for all calculations: • 10% deposit is paid along with a home loan over 20 years. • No taxes, rates, levies or other fees have been taken into account. While sifting through many listings, one gets a sense of a realistic monthly or nightly rental, but it’s important to remember that there is quite a variance depending on exact location, the state of the unit and the building. For short-term stays, the interior and finishes play an important role too. One should err on the side of caution when doing calculations and try to factor in all the costs that are known. Cape Town De Waterkant Johannesburg Rosebank UK Manchester UK London R 3,250,000.00 R 325,000.00 10.5% R 29,202.61 R 2,450,000.00 R 245,000.00 10.5% R 22,014.28 R 2,992,800.00 R 598,560.00 4.0% R 14,508.62 R 9,256,800.00 R 1,851,360.00 4.0% R 44,875.51 R 20,000.00 R (110,431.34) 6 R 15,000.00 R (84,171.32) 6 R 17,458.00 R 35,392.52 Not straightforward R 46,284.00 R 16,901.88 Not straightforward R 2,300.00 13 R 671,600.00 R 1,400.00 16 R 408,800.00 R 1,200.00 12 R 350,400.00 Regulations - 90 day limit - council tax R 321,168.66 R 144,628.68 R 176,296.52 - planning permit 6% R 2,641,816.55 R 4,349,233.13 R 1,707,416.58 3% R 1,991,523.24 R 2,840,221.48 R 848,698.24 4% R 1,961,451.98 R 3,641,198.81 R 1,679,746.83 3% R 6,066,816.58 R 10,731,168.25 R 4,664,351.67 Thinking it through Besides the facts and figures, an important factor to consider is whether you are purchasing a place that you plan to live in yourself later in life. Finding a suitable retirement apartment has many added advantages and having a foot in the door in the UK may be useful in the future. Similarly, retiring in Cape Town may be appealing to you or perhaps you wish to be nearer your family in Joburg. There are many elements to consider, so consulting with a specialist is always recommended – especially for some of the trickier aspects such as taxation and estate planning. Brendan Dale