Question 1

What is gross rental yield?

Accepted Answer

Gross rental yield is your annual rental income divided by the property's purchase price, shown as a percentage. For example, if you bought a flat for R1 million and rent it for R8,000/month (R96,000/year), your gross yield is 9.6%. This doesn't include expenses.

Question 2

What is net rental yield?

Accepted Answer

Net rental yield is your annual rental income MINUS all expenses (rates, levies, insurance, maintenance, agent fees, vacancy), divided by the purchase price. This is the real number that matters. A property with 9% gross yield might only have 5-6% net yield after expenses.

Question 3

What rental yield should I aim for?

Accepted Answer

In South Africa, a gross yield above 8% is considered good, and above 10% is excellent. For net yield, aim for at least 5-6% to beat inflation. In Cape Town yields are typically lower (6-8% gross) due to high prices, while Johannesburg and Pretoria often offer 8-12% gross.

Question 4

How do I calculate if a rental property is profitable?

Accepted Answer

Your property is profitable if the net rental income (after all expenses) is more than your bond repayment. If you're cash-flow positive from month one, that's ideal. Many investors accept small negative cash flow if the property is appreciating in value and the tenant is paying off the bond.

Question 5

What expenses should I budget for as a landlord?

Accepted Answer

Monthly: rates & taxes, body corporate levies, insurance, managing agent fee (8-10% of rent). Annual: maintenance reserve (1-2% of property value), compliance certificates. Also budget for 1 month vacancy per year and potential non-payment. Total expenses are typically 25-40% of gross rent.

Question 6

Should I use a rental agent or manage myself?

Accepted Answer

Agents charge 8-10% of monthly rent plus a placement fee (usually one month's rent for finding a tenant). They handle tenant screening, rent collection, and maintenance calls. Self-managing saves money but takes time. For your first property or if you live far away, an agent is usually worth it.

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