I’m assessing a 3-bed serviced apartment in Cape Town at ZAR 20,840,000. Expected rent is ZAR 139,200 per month, which gives a headline gross yield of roughly 8.0% before costs.
The building appears sound, but I’m concerned that insurance could materially alter the result. My conservative cash-flow model already allows for vacancy, management, routine maintenance and a reserve for one larger repair. I’m also testing financing sensitivity and the effect of higher tenant turnover.
For those familiar with Cape Town serviced apartments, which local cost is easiest to underestimate—insurance, property tax, management, maintenance, or something else? I’d also appreciate views on what net yield would adequately compensate for the operating and vacancy risk at this price. If you were stress-testing this deal, which single assumption would you push hardest?
The building appears sound, but I’m concerned that insurance could materially alter the result. My conservative cash-flow model already allows for vacancy, management, routine maintenance and a reserve for one larger repair. I’m also testing financing sensitivity and the effect of higher tenant turnover.
For those familiar with Cape Town serviced apartments, which local cost is easiest to underestimate—insurance, property tax, management, maintenance, or something else? I’d also appreciate views on what net yield would adequately compensate for the operating and vacancy risk at this price. If you were stress-testing this deal, which single assumption would you push hardest?