In particular we focus on getting the loan structure right the first time, choosing which lenders to use in the right order (yes this is important) and finally getting our clients the best deal possible.
Yield
Yield represents the income an investment generates and is usually expressed as a percentage.
A gross rental yield is calculated by taking the annual rental income and dividing it by the purchase price, 5-8% is considered good for residential properties.
Gross Rental Yield = (Annual Rental Income / Purchase Price) x 100
A net rental yield is the annual net profit that an investor earns on an investment property. Also known as the capitalisation rate, the yield on rental property shows investors how much income they’ll generate on their holdings after accounting for operating expenses. It is calculated by taking the annual expenses away from the annual income and dividing by the property price. A net rental yield of 4-7% is considered good for residential property markets.
Net Rental Yield = (Annual Rental Income – Annual Expenses / Purchase Price) x 100
Understanding how property yield works can help you estimate the ongoing return on your investment. It can also be useful when reviewing the rent on an investment property.
Factors that influence yield include location, Market Conditions, Property type, plus Management and expenses.
Here’s how to calculate gross rental yield:
- Sum up your total annual rent that you would charge a tenant
- Divide your annual rent by the value of the property
- Multiply that figure by 100 to get the percentage of your gross rental yield
Understanding how property yield works gives you a better idea of the ongoing return you will earn on your investment. It can also be helpful when it comes time to review the rent on an investment property. When you know the rental yield of a property, you’re also better placed to understand if it is the right place for your investment goals, or if you could earn a higher rental yield with a different property or by investing in another suburb.
Learn MoreUnderstanding rental yields is important for real estate investors as it helps determine what the ongoing yield of a potential investment is and whether it is in line with the overall investment objectives. Typically, the driving force behind purchasing an investment property is to make more money. If you’re a property investor, rental yield can give you an idea of how much money you’re earning each year on your property.
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