All Topics / General Property / Calculation for the annual rental yield?

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  • Profile photo of AdamlAdaml
    Participant
    @adaml
    Join Date: 2003
    Post Count: 6

    Can anyone clear something up for me. Is the annual rental yield the gross yearly rental income divided by the loan amount or by the pruchase price…. or do I just have no idea?

    Profile photo of wilandelwilandel
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    @wilandel
    Join Date: 2003
    Post Count: 761

    Hi Porsche,

    Annual rent divided by purchase price = gross yield.

    eg.. $150pw x 52 = $7800
    $7800 div by $70000 purchase price = 11.14% gross return.

    Regards,

    Del [:)]

    Profile photo of Still in SchoolStill in School
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    @still-in-school
    Join Date: 2003
    Post Count: 1,844

    To get the Profit yield against the loan and not to take in cash on cash as consideration is worked out like this.

    $70,000.00 purchase price – weekly loan repayment $104.92 (based on 6% over 30 years)

    Rental = $150
    Passive income = $45.08

    Profit yield against the loan = $45.08 divide by $150 = 30%

    Profile photo of p0sitiveCasHfl0wp0sitiveCasHfl0w
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    @p0sitivecashfl0w
    Join Date: 2003
    Post Count: 133

    Still in School… why are you dividing the weekly profit by the weekly rent?? Your equation should look like this:

    Profit yield against the loan = $45.08 divide by $104.92 * 100 = 42.9%

    Cheers,

    Jay

    **********************************
    You must stay pOsitive
    …then the cAsHfl0w will come!
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    Profile photo of Still in SchoolStill in School
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    @still-in-school
    Join Date: 2003
    Post Count: 1,844

    oh sorry about that, not thinking and puttin in the wrong caculations.

    thanks positive cashflow

    Profile photo of Still in SchoolStill in School
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    @still-in-school
    Join Date: 2003
    Post Count: 1,844

    refer to my mistake as passive profit as “passive profit as a percent”

    Profile photo of muppetmuppet
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    @muppet
    Join Date: 2003
    Post Count: 900

    Hi Guys

    Don’t forget your weekly share of expenses eg rates, insurance, water rates etc. That will increase your weekly outgoings and therefore lower the %.

    I think it is better to look at net yield rather than gross yield if you want money in your pocket.

    The tax refund then is the cream on the cake.

    Regards

    Profile photo of AdamlAdaml
    Participant
    @adaml
    Join Date: 2003
    Post Count: 6

    Hi muppet,
    It’s a good point you make about net verses gross. I read an article the other day stating that most investment properties return an annual rental yield of around 2-3%. I am guessing this is due to them being negatively or neutrally geared??? However, this article also stated that to be able to continue to leaverage, Financial Institutions like to see an annual rental yield of >8%. It is for this reason I would like to make sure my calculations (formula) are correct on this. If there are any Morgage Brokers out there that could clear up, or shed some light on the yield issue, it would be greatly appreciated.
    Thanks.

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