How this calculation works
Annual collected rent is monthly rent × 12 × (1 − vacancy). Net operating income subtracts operating costs. Gross and net yield divide rental income by purchase price. Cash flow also subtracts bond payments; cash-on-cash return divides annual cash flow by deposit plus upfront buying costs.
A worked example
A R1 million cash purchase with R10 000 monthly rent, no vacancy and R2 000 monthly costs has 12% gross yield and 9.6% net operating yield before tax.
Assumptions & limitations
- Cash flow and yield are before tax. Interest is a financing cost; bond principal builds equity and is not an operating expense. Appreciation, selling costs and vacancies beyond the entered allowance are excluded.
- Loan cannot exceed price. A zero cash investment has no meaningful cash-on-cash percentage and is labelled accordingly.
