How do you calculate rental Yield on a property?
What rental yield is ideal when looking for a investment property?
Say I have a property valued at 400K, mortgage at 320k and rental income of 350 per week. What is the rental yield?
I assume an ideal rental yield will differ for different suburbs, cities, coastal and from house to units etc. So how do u know what is a good rental yield for each different property and location?
What I look at when building a new property and looking for a property I look at the purchase price and the possible weekly rental, so I try to purchase a house that allows me 1 dollar of rental income to every 1000 dollars of the purchase price. So I would only purchase a 300,000 dollar house only if I receive a rental income of 300 a week.
Another thing I do when building new homes. I make sure I purchase the cheapest piece of land in the most expensive locations and build a quality home and after completion expect valuation to be at least 25% of the cost. It has worked for me in the past 5 homes I have built in last 3 years. If I am not able to get the 25% + valuation increase I will look elsewhere.
What do u look for when you are purchasing a property? What makes it a good deal?
Net yield = Net Annual Rental Income / Current Market Value.
Do not include interest, tax or depreciation in your net yield as these affect each investor differently.
in your eg. $350 x 52 = 18,200
Price is $400,00
yield is 18,200/400,000 = 4.55%Have a look at rough rents in the suburbs you are looking at and the rough prices and work out an estimate. When looking at properties ask the agent what hey will rent at (and take off 10% for exageration!) and then call up pretending you want to rent a similar property and see how much it is.
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Hi
Go to http://www.somersoft.com.au and purchase the program, it is the best one about and answers all your questions.
In regards the rental yield question, the program takes all the variables into account.
That said based on your scenario, the yield would be 3.40% and the property would cost $32 per week in the first year to hold, calculated on $120,000 income ($75,000 investor, $45,000 partner) on a 80/20% tax relief.
I have properties (house and land packages) in queensland for sale that show 6% yield.
Regards
Bluegrass
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