The three measures
| Measure | Formula | What it captures |
|---|---|---|
| Gross yield | Annual rent divided by purchase price | Headline income only. Ignores every cost. |
| Net yield | Annual net operating income divided by total cost | Income after running costs, before finance. |
| Cash-on-cash | Annual cash flow divided by cash invested | What your actual cash produces, after finance. |
Net operating income is rent less vacancy, levies, rates, insurance, management and maintenance. It deliberately excludes the bond, because financing is a decision about you rather than about the property. Cash-on-cash then adds the financing back in, measured against the deposit and acquisition costs you actually paid.
Use total cost, not asking price
A yield calculated on the purchase price alone flatters the property. Include transfer duty, conveyancing, bond registration and any immediate work needed to make the unit lettable. On a R1.6 million purchase that can add close to R100 000, which is a real reduction in yield.
Yield is not the whole decision
High-yield stock is often in areas with weaker capital growth, higher tenant turnover and heavier management. Low-yield stock in established suburbs may deliver more of its return through value over time. Compare yield alongside expected growth, vacancy risk and the effort the property demands.
Professional tips
- • Use net yield to compare properties and cash-on-cash to compare uses of your capital.
- • Recalculate yield annually against current market value, not original price.
- • Treat a yield well above the local range as a question, not a discovery.
Common mistakes to avoid
- • Quoting gross yield as if it were a return.
- • Calculating on the asking price instead of total cost including acquisition.
- • Leaving vacancy and maintenance out of net operating income.
Frequently asked questions
What is a good rental yield in South Africa?+
Should the bond be included in yield?+
Why does my yield fall over time?+
Key takeaways
- Gross yield is a screening number, not a decision number.
- Net yield uses income after running costs and before finance.
- Cash-on-cash return measures what your invested cash actually earns.
- Calculate on total cost including acquisition costs, not the asking price.
- Read yield together with growth prospects, vacancy risk and management effort.
Model it for your property
Run the numbers with our free calculators.
References
About the author
BookingLoop Advisory
Property performance desk
Our performance desk assesses income-producing residential property, testing rental assumptions, running costs and operating models before an owner commits capital.
Published 20 January 2026 · Last updated 3 February 2026
Comparing two properties?
We will run both on the same assumptions so the comparison is fair.
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