Rental yield, the honest way: a Johannesburg investor's back-of-envelope method
14 September 2026 · 3 min read
Ask ten property investors how to calculate yield and you'll get ten slightly different answers — and a suspicious number of them happen to produce a more flattering number than a stricter method would. Here's a version built to be honest with you, not to make a marginal deal look good.
Gross yield: the number everyone quotes
Gross yield is the simplest calculation — annual rental income divided by purchase price, expressed as a percentage:
Gross yield = (Monthly rent × 12) ÷ Purchase price × 100
It's easy to calculate and easy to compare across properties, which is exactly why it's the number most commonly quoted. It's also the most misleading one, because it includes zero costs.
Net yield: closer to honest
Net yield subtracts the actual costs of owning and letting the property before annualising:
Net yield = (Annual rent − annual costs) ÷ Purchase price × 100
"Annual costs" should genuinely include:
- Rates and municipal services (the portion you carry as owner, if any)
- Levies (for sectional title — see our piece on freehold vs. sectional title)
- Insurance
- A realistic maintenance allowance, not zero
- Letting agent fees, if you're not managing it yourself
- A vacancy allowance — no property is tenanted 100% of the time; budgeting a month or two of vacancy per year is honest, not pessimistic
The step most investors skip: bond costs
If you're financing the purchase, your actual cash return depends on bond repayments too — which gross and net yield both ignore, since they're calculated against the full purchase price regardless of how it's funded. A property with a respectable net yield can still be cash-flow negative once bond repayments are subtracted, especially highly geared or at a higher interest rate. This is the number that actually determines whether the investment funds itself monthly or draws on your other income.
Why the honest number is the useful one
A gross yield that looks attractive on a spreadsheet can turn into a marginal or negative cash-flow position once levies, maintenance, vacancy and bond costs are properly accounted for — and finding that out after you've bought is a much more expensive lesson than doing the fuller calculation first.
The bottom line
Gross yield is a screening tool, not a decision-making number. Net yield, and then actual cash flow after financing, is what tells you whether a specific property is a genuinely good investment or just a good-looking one.
This is general information, not financial or investment advice. Individual costs, financing terms and market conditions vary significantly; consult a qualified financial adviser before making an investment decision.