Projected vs Actual Returns

A projected return is a model output. It takes a set of assumptions — about rent, occupancy, expenses, appreciation, and hold period — and calculates the return those assumptions would produce. The projected net yield on a property page is not a forecast of what will happen; it is a statement of what would happen if the assumptions hold. The assumptions are the model; the projection is the result.

This distinction is critical. A 6% projected yield does not mean you will receive 6%. It means that if rent is collected as assumed, expenses are as assumed, and occupancy holds, you will receive 6%. If any assumption breaks, the actual return moves.

The most common source of divergence is rent. If a tenant negotiates a rent reduction, falls into arrears, or vacates early, the actual rent falls below the assumption and the yield drops. Occupancy is the second: a void period means no rent for weeks or months, and the cost of re-letting (agent fees, refurbishment) further reduces the period's distributable income.

Expenses can also diverge. Inflation lifts costs over time; an unexpected repair (a roof, a boiler, a lift) can consume a year's maintenance budget in one event. Appreciation is the most uncertain assumption of all: it depends on market conditions years in the future, and a downturn at the planned exit can turn a projected gain into a loss.

After you invest, track the actual distributions you receive against the projection. A small, consistent gap is normal — projections are rounded, and reality is lumpy. A widening gap is a signal: if actual distributions are consistently 20% below projection, the property is underperforming its assumptions, and you should understand why. Is the tenant paying less? Are expenses higher? Is occupancy down?

Good platforms publish a per-period comparison of projected vs actual income, so investors can see the gap and its causes. If your platform does not provide this, calculate it yourself from the distribution notices you receive. The gap is the most honest measure of how the investment is really performing.

Before investing, stress-test the projection. Ask: what happens to the yield if rent falls 10%? If occupancy drops to 90%? If appreciation is zero rather than the projected 4%? If the answer is that the return becomes unattractive under plausible stress, the investment is riskier than the headline suggests. If the return remains acceptable under stress, the assumptions have a margin of safety.

This does not require complex modelling. A rough mental model is enough: take the projected yield, subtract a few percentage points for adverse scenarios, and decide whether the resulting return is acceptable for the risk. If it is not, pass. There will be other properties.