There are two ways landlords make money through property letting

capital growth

rental income growth

Let's take a look at these in more detail.

When a property increases in value over time, it is known as capital growth.

Capital growth, also known as capital appreciation, which has been strong in recent times. Of course the value of property does go up as well as down, and of course the local conditions surrounding your property have a big effect. Overall the property values always have a steady incline and are always above the inflation rate, therefore you will always make more money on property than if you just kept it as hard cash! The capital growth is basically the difference of what you paid for the property and what you sold the property for. For example if you bought a home in 1990 for R200K then 20 years later in 2010 the same house will be worth R2million - the capital growth is R1.8million.

Rental income is what the tenant pays you and hopefully this will grow over time too. The ideal thing about rental income is that you are using other peoples money to make you wealthier and increase the value of your assets. In addition to the all important income, you will also need to budget for a number of necessary costs. It's worth highlighting what these costs are so you can budget for them. This is especially important as ultimately you are responsible for these costs whether the property is occupied or not! For example if you bought the house for R200K in 1990 you could rent it out for R1500 per month which would increase every year to a monthly rental of R 20 000 per month in 2010 and because you had a bond for 20 years that was being paid for with other peoples money ( the tenants ) the property is now fully paid for and still generating rental income of more than R 20 000 per month.