INVESTING
1. How to Calculate Rental Yield
RENTAL YIELD FORMULA
RENTAL YIELD EXAMPLE
INVESTING
Understanding the Different Types of Returns on Property When you invest in property, you earn money in two main ways:
Rental Income- the monthly cash flow you receive from tenants. Capital Growth- the increase in the property’ s market value over time.
This dual- income stream is what makes property so powerful. And the best part? You can calculate each of these returns quite easily to assess performance.
1. How to Calculate Rental Yield
Rental yield gives you a percentage return on your investment based on rental income. It’ s one of the simplest ways to evaluate the income performance of a property.
RENTAL YIELD FORMULA
Rental Yield =( Annual Rental Income / Property Purchase Price) × 100
RENTAL YIELD EXAMPLE
Property Purchase Price = R1,000,000 Annual Rental Income = R100,000 Rental Yield =( 100,000 / 1,000,000) × 100 = 10 %
A 10 % rental yield is considered excellent in most markets. Even a 7- 8 % yield can be very strong depending on the location and other factors.
30 REI MAGAZINE APRIL 2025