Friday 9 March 2012

Should I rent or Should I Buy?


So as a matter of interest did you know that over a ten year period,  it is normally cheaper to buy our own business property, than to pay rent each month. The reason is quite simple : Rentals generally increase each year, whereas a bond repayment stays the same ( except for interest rate increases). 


So getting a mortgage or bond of up to 80 % for tenants that want to buy their own premises. If a tenant occupies more than 60 % of the premises they operate from, then a No Deposit, 80 % commercial property loan can be arranged.
So why not approach your clients and offer them 80% bonds on commercial and industrial properties ? Why not consider this for yourself ?
RENT versus BOND Example Property Value R 4,8 million
Year  Rent      Rent with   Bond            Difference          Difference
        In Rand  Escalation   Repayment  per Month          Per Annum
                       At  9%        In Rand
2012 54,500    59,405      63,450             - 8,950                  -107,400
2013 59,405    64,751      63,450             - 4,045                  - 48,540
2014 64,751    70,579      63,450              1,301                     15,612        
2015 70,579    76,931      63,450              7,129                     85,548
2016 76,931    83,855      63,450             13,481                  161,772
2017 83,855    91,402      63,450             20,405                  244,860
2018 91,402    99,628      63,450             27,952                  335,424
2019 99,628    108,595    63,450             36,178                  434,136
2020 108,595  118,368     63,450            45,145                   541,740

Rental Total = R 9,115,752        Bond  Total = R 7,614,000                 Saving: R1,501,752
In addition to the saving in rent, there is capital growth on the building as well as the fact that the building will belong to the purchaser after 10 years.
Capital Growth on building bought at R 4,8 million, at a very conservative 3% per annum growth rate, will give a value of R6,450,798 after 10 years and then there is no rent to pay from year 11 onwards !!
The owner of a self tenanted building, bought at R 4,8 million could be R 7 952 550 better off in 10 years time, if they buy their own building as opposed to renting.  
Interesting!

3 comments:

Anonymous said...

Thats a very interesting concept.

Bryden

Real Estate in Uruguay said...

You can buy this. This is awesome. You have great opportunity.

Pune Property said...

Great analysis and Very good stuff, will keep my eyes on your information