How to determine if a property is profitable or a good investment
In this week’s Property Magicians Podcast, we bring you a bonus episode from a class we had for our stokvel members where Leroy taught us about running the numbers and analyzing a deal so we could understand what makes a property profitable and if it's ever a good idea to make a loss in cash flow on an investment.
In this class, we learned that there are three stages when it comes to running the numbers:
Stage 1: Capital Cost
- Transfer Attorney fees
- Transfer Duty (if your property is over a million rand)
- Bond Attorney fee
- Deposit
- Auctioneer costs
Stage 2: Refurbishment/ Holding Cost
- Rate & Taxes
- Electricity/water
- Bond/interest
- Refurbishment
- Levies
- Insurance
Stage 3: Letting/Resell Cost
- Bond/Interest
-Insurance
- Rates & taxes
- Levies
- Maintenance
- Management fee
- SELL- EA Commission
Leroy also taught us some fundamental Calculations:
● How to calculate gross yield and why this figure is important
● How to calculate cash flow so we can know if a property is a good investment
● How to calculate capital cost so we could budget and know how much of our own
money we are investing in a deal
● How to calculate ROI (Return on Investment)
This is a very valuable episode, so we recommend you get your pen and paper out and take notes. And don’t forget to join the Property Magicians Stokvel because we’re building an incredible property portfolio and providing real estate education.
