Most buyers start from the asking price and ask “how much below can I go?”. For a property you will rent out, that is the wrong way round. The asking price is what the seller hopes for. What the property is worth to you depends on the rent it can earn and what it costs to hold.
Start from the rent
Each month the rent has to cover the bond, the levy, rates, insurance, maintenance, the letting agent and the odd empty month. The lower the price, the smaller the bond, and the sooner the rent covers everything. So there is a highest price at which the property pays for itself from day one — and a slightly higher one at which it pays for itself within a year, two years, and so on, as the rent goes up.
IQprop calls those years the T-rating: T0 pays from day one, T4 takes four years. Above the T4 price the property still costs you money after four years. That is your walk-away price.
An example, at today’s prime
A R1 990 000 house that rents for R19 500 a month, with a 20% deposit, a 20-year bond at prime, a levy of R900, rates of R1 300, and normal insurance, maintenance and agent’s fees. At the asking price the first year works out to R2 415 a month out of your pocket. The most you could offer for each T-rating:
| T0 — Pays from day one | R1 692 000 |
|---|---|
| T1 — Pays within 1 year | R1 773 000 |
| T2 — Pays within 2 years | R1 857 000 |
| T3 — Pays within 3 years | R1 945 000 |
| T4 — Walk-away price | R1 990 000 |
Calculated at prime 10.75%, effective 25 Sep 2026. Saved analyses record the rate they were run at, so reopening one shows what you were shown.
Then decide how hard to negotiate
- Pick the T-rating you can live with. If you can top up for a year or two, you can pay more. If you cannot, stay at T0.
- Offer below that price, not at it. The price for your T-rating is your ceiling. Leave room to meet the seller.
- Keep your walk-away price to yourself. Never tell the agent. Above it, walk away — there are other properties.
- Check the rent first. The whole calculation rests on it. Look at what similar homes nearby actually rent for, not what the agent hopes.
Make the offer count
In South Africa you make an offer by signing an Offer to Purchase, which the agent draws up. Sellers take an offer more seriously when it is simple and the buyer is ready: few conditions, a clear deposit, and a bond pre-approval from a lender behind it. IQprop can give you a one-page offer sheet with your price and conditions to send the agent.