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Rental Yield Calculator: Is Your Property Investment Profitable?

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Rental Yield Calculator: Is Your Property Investment Profitable?

You bought a rental property. The tenant is paying rent. But are you actually making money?

Rental yield is the single most important metric for measuring property investment performance. It tells you what return your property generates as a percentage of its value — and it lets you compare properties, areas, and even asset classes on equal footing.

Yet most South African landlords don’t calculate their yield. They assume rent minus bond equals profit, ignoring the dozen other costs that eat into returns.

This guide shows you exactly how to calculate gross and net rental yield, what benchmarks to aim for, and which factors drag your yield down.

What Is Rental Yield?

Rental yield is the annual rental income your property generates, expressed as a percentage of the property’s value. There are two types:

  • Gross rental yield — the simple ratio before expenses
  • Net rental yield — the real return after all costs

Both are useful, but net yield is what actually matters to your bank account.

How to Calculate Gross Rental Yield

Formula:

Gross Rental Yield = (Annual Rental Income ÷ Property Value) × 100

Example:

  • Monthly rent: R12,000
  • Annual rent: R12,000 × 12 = R144,000
  • Property value: R1,800,000
  • Gross yield: (R144,000 ÷ R1,800,000) × 100 = 8.0%

Gross yield is quick and useful for comparing properties at a glance. But it doesn’t tell you how much money you’re actually keeping.

How to Calculate Net Rental Yield

Formula:

Net Rental Yield = ((Annual Rental Income − Annual Expenses) ÷ Property Value) × 100

Annual expenses include:

  • Bond interest (not capital repayment)
  • Municipal rates and taxes
  • Body corporate or HOA levies
  • Insurance premiums
  • Maintenance and repairs (annualised average)
  • Property management fees
  • Vacancy allowance (typically 5-8% of annual rent)
  • Tenant screening and administration costs

Example:

  • Annual rent: R144,000
  • Annual expenses: R96,000
    • Bond interest: R54,000
    • Rates and levies: R18,000
    • Insurance: R6,000
    • Maintenance: R8,000
    • Management fees (10%): R14,400
    • Vacancy (1 month): R12,000
    • Admin/screening: R1,200
    • Total: R113,600
  • Wait — those expenses actually add up to R113,600, not R96,000. Let’s use the real numbers:
  • Net rental income: R144,000 − R113,600 = R30,400
  • Net yield: (R30,400 ÷ R1,800,000) × 100 = 1.7%

That’s the reality check. A property with an attractive 8% gross yield might deliver under 2% net. And we haven’t even factored in capital repayments, which aren’t an “expense” in accounting terms but are very real cash outflows.

Cash-on-Cash Return — The Third Metric

If you financed the property with a bond, there’s an even more practical metric: cash-on-cash return. This measures the return on the actual cash you invested (your deposit and transfer costs), not the full property value.

Formula:

Cash-on-Cash Return = (Annual Net Rental Income ÷ Total Cash Invested) × 100

Example:

  • Total cash invested (deposit + transfer costs): R360,000
  • Annual net rental income: R30,400
  • Cash-on-cash return: (R30,400 ÷ R360,000) × 100 = 8.4%

This metric is especially useful because it accounts for leverage. A property with low net yield can still deliver a solid cash-on-cash return if you put down a small deposit and the rental income covers the bond.

Benchmark Rental Yields by City (2026)

Rental yields vary dramatically across South Africa. Here are approximate benchmarks for 2026, based on data from TPN, PayProp, and Lightstone:

Cape Town

  • CBD and City Bowl: 6-9% gross, driven by strong demand and short-term rental potential
  • Atlantic Seaboard: 3-5% gross — high property values suppress yields despite premium rents
  • Southern Suburbs: 5-7% gross, solid middle ground with consistent demand
  • Northern Suburbs: 6-8% gross, strong family rental market
  • Cape Flats and periphery: 8-12% gross, but higher vacancy and risk

Johannesburg

  • Sandton and surrounds: 5-7% gross
  • Midrand: 7-9% gross, benefiting from Gautrain and corporate demand
  • Fourways / Lonehill: 6-8% gross
  • Johannesburg CBD: 8-12% gross, but high vacancy and management intensity
  • South and East Rand: 7-10% gross

Durban

  • Umhlanga: 5-7% gross
  • Durban North: 6-8% gross
  • Ballito (KwaDukuza): 6-9% gross, popular with holidaymakers and retirees
  • Durban CBD: 7-10% gross, similar dynamics to Johannesburg CBD

Pretoria

  • Centurion: 7-9% gross
  • Hatfield / Arcadia: 8-11% gross, university and government demand
  • East of Pretoria: 7-9% gross

General rule: Higher gross yields often come with higher risk (vacancy, arrears, management effort). A stable 6-7% gross in a good suburb typically outperforms a volatile 10%+ in a difficult area.

For a detailed breakdown of average rents by suburb, see our guide to average rents in Cape Town, Johannesburg, and Durban.

Factors That Kill Your Yield

Understanding what drags yield down helps you protect it:

1. Vacancy

Every month without a tenant is a 100% income loss for that period. A one-month vacancy on a R12,000/month property costs you R12,000 — but you still pay the bond, rates, and insurance.

Mitigation: Screen tenants properly to reduce turnover. Price your rent competitively. Keep the property well-maintained to retain good tenants. Indlu’s AI screening tools help you find reliable tenants faster.

2. Arrears and Non-Payment

The TPN Vacancy Survey consistently shows double-digit arrears rates in South Africa. A tenant who stops paying for three months before you can evict them costs you the missed rent plus legal fees.

Mitigation: Thorough credit screening, clear lease terms, and prompt action on late payments.

3. Maintenance Neglect → Major Repairs

Deferring small repairs leads to expensive emergencies. A R500 leak ignored becomes a R15,000 ceiling and plumbing repair.

Mitigation: Budget 8-10% of annual rent for maintenance. Do regular inspections.

4. Overleveraging

A 100% bond means every cent of rent goes to the bank, leaving nothing to absorb vacancies or repairs. If interest rates rise, your yield turns negative.

Mitigation: Aim for a loan-to-value ratio that allows positive cash flow even if rates increase by 2%.

5. Mispriced Rent

Charging too much leads to extended vacancy. Charging too little leaves money on the table. Both hurt yield.

Mitigation: Research comparable rents in your area quarterly. Adjust at lease renewal.

How to Improve Your Rental Yield

If your current yield isn’t where you want it, consider these levers:

  • Reduce vacancy — faster tenant placement through better marketing and screening
  • Cut management costs — switch from a traditional agent (10-12%) to a platform like Indlu (from R99/mo flat)
  • Claim all tax deductions — every deduction you miss is money lost (see our landlord tax deductions guide)
  • Add income streams — parking rental, storage space, laundry facilities
  • Refinance at a better rate — even 0.5% lower interest makes a material difference on large bonds
  • Reduce maintenance costs — preventative maintenance is cheaper than emergency repairs
  • Review insurance annually — shop around; premiums vary significantly between providers

Rental Yield vs Other Investments

Property isn’t the only game in town. How does rental yield compare?

  • SA government bonds (R186): ~10-11% yield, zero effort, but no capital growth
  • JSE All Share Index: ~12% average total return over 10 years (with significant volatility)
  • Money market funds: ~8-9% at current rates, fully liquid
  • Rental property: 5-8% gross yield + capital appreciation (historically 5-7% per year in good areas)

Property’s advantage is leveraged capital growth. If your property appreciates 6% on a R1.8M value, that’s R108,000 in capital growth — on a R360,000 cash investment, that’s a 30% return on equity. Combined with net rental yield, the total return can be compelling.

But this only works if your yield is positive. Negative cash flow erodes returns quickly.

Frequently Asked Questions

What is a good rental yield in South Africa?

A gross yield of 7-9% is generally considered good for residential property. Net yield of 3-5% after all costs is realistic and competitive with most other asset classes when combined with capital appreciation.

Should I use purchase price or current market value?

For measuring your actual return on investment, use purchase price. For comparing opportunities or deciding whether to keep a property, use current market value.

How do I account for capital growth?

Capital growth is separate from rental yield. Total return = rental yield + capital appreciation. Some investors accept low yields in areas with high growth potential, but negative cash flow is risky if growth doesn’t materialise.

Does rental yield include tax?

The calculations above are pre-tax. Your after-tax yield depends on your marginal tax rate and the deductions you claim. See our rental income tax guide for details.

Track your real yield across all properties in real time — Indlu’s portfolio dashboard shows income, expenses, and yield at a glance. Start free today.

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Indlu Team

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