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Tuesday Apr 28, 2009

Large homes raising top rentals

LARGE, expensive Cape homes bought before 2004 are now bringing in impressive rental returns, says Mike Greeff, chief executive of Greeff Properties.

"A surprising number of our clients are opting to rent out their homes rather than sell and the reasons for this are not difficult to understand," he says.

"Anyone who bought a home before 2003/4 would have seen at least a 125 percent appreciation in value to date and as the rents are by and large calculated on current values, it is now possible for a landlord who has owned his home for five years or more actually to cover or almost cover his monthly bond repayments."

Quoting a typical example, Greeff says a home owner who bought a Constantia property for about R2 million in 2003 had his home appreciate in value to R4.5m by the end of last year. The increases this year, says Greeff, have been far slower than before.

"Originally, the owner was paying 12.5 percent interest on a 95 percent bond (these were readily available in 2003) and now is paying 13 percent, and his repayments are about  R22 000 a month. This is about R3 000 more than the original payments but in the meantime the rental has risen from  R12 000 a month to R23 000 a month - a welcome increase for owners who are trying to cover as much of their bond as possible.

"With fewer people buying large Constantia, Bishopscourt and Upper Kenilworth homes," says Greeff, "rental properties valued at above R3m are in demand. A R4m plus home is being rented at between R22 000 to R25 000 a month."

Surprisingly, says Greeff, there are still certain investors buying expensive Constantia and Bishopscourt homes to rent out, even though the rental may well cover only 40 percent of their bond repayments.

"They believe the capital appreciation will be substantial in the next five years. This arrangement can make especially good sense if the owner is earning a large income or has other rental properties which are showing a profit. In such a case the income can be offset against the interest paid on the newer investment."-Sunday Argus

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