Calculating Returns
A focused learning module to guide you step-by-step on your property investment journey.
Understanding how to calculate returns is essential for making informed investment decisions. Different metrics tell you different things about your investment performance.
1. Rental Yield (Gross & Net)
Gross Rental Yield
Formula: (Annual Rental Income ÷ Property Value) × 100
Example: R120,000 annual rent ÷ R1,500,000 property value = 8% gross yield
Net Rental Yield
Formula: ((Annual Rental Income - Annual Expenses) ÷ Property Value) × 100
Expenses include: rates, levies, insurance, maintenance, property management, vacancy allowance
2. Cash Flow Analysis
Positive cash flow means your rental income exceeds all expenses including bond repayments. Negative cash flow (cash flow negative) means you need to top up from other income sources.
Monthly Cash Flow Calculation
- Rental Income: R10,000/month
- Less Bond Repayment: -R8,500/month
- Less Rates & Levies: -R1,200/month
- Less Insurance: -R300/month
- Less Maintenance Reserve: -R500/month
- Net Cash Flow: -R500/month (cash flow negative)
Note: Negative cash flow can still be profitable if capital appreciation exceeds the shortfall.
3. Return on Investment (ROI)
ROI measures the total return on your invested capital, including both rental income and capital appreciation.
Formula: ((Annual Profit + Capital Gain) ÷ Total Investment) × 100
4. Capital Growth
Capital growth is the increase in property value over time. In South Africa, property values have historically grown at 5-7% annually, though this varies by location and market conditions.
Toolkit
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Essential resources, templates, and checklists to help you on your home buying journey. Click View to explore each resource in detail.
ROI Calculator Template
TemplateCalculate your return on investment