All Topics / Help Needed! / benchmark investment property returns

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  • Profile photo of simmo_bcsimmo_bc
    Member
    @simmo_bc
    Join Date: 2010
    Post Count: 9

    Hi all,

    I was wondering if an experienced investor could point me in the right direction in terms of what benchmark I should use to determine whether the investment return i am getting is reasonable.

    Opportunity cost is the question so is it as simple as comparing a property investment return to a term deposit rate, 10 year government bond rate et al?

    I have a 2 bedroom apartment in Adelaide which has appreciated +150% over a 10 year period however the gross and net yields are quite low, the net yield is c6% (mainly due to the fact that i have paid off a large portion). Based on capital growth, the investment has been fantastic however based on yield it is questionable as without repayments, the net yield would be <5%.

    My investment objectives are quite simple, I want an investment with capital growth that will provide rental income in retirement (I am 33). I guess based on the above, i have achieved my goal?

    I would appreciate any insight into what experienced investors use to determine the effectiveness of their invesment. I am trying to bring a little sophistication to my assessment…!

    Regards

    Beau

    Profile photo of DerekDerek
    Member
    @derek
    Join Date: 2004
    Post Count: 3,544

    Hi Beau,

    I tend to keep things simple. Percentages of growth and nett rent return all sound fine but what do they mean in real dollars?

    It is the real dollars that will determine whether or not you have achieved your goals. Work out what you need/want in retirement in todays dollars and work towards this target. Don't forget to upgrade your requirements to take inflation into account.

    I monitor Westpac's living standards reports to give me a becnhmark and work from there.

    Profile photo of Tony FlemingTony Fleming
    Participant
    @the-dark-knight
    Join Date: 2008
    Post Count: 396

    Hey Derek,
                      How do you find westpacs living standard reports?

    Tony Fleming | Triumphant Property Group
    http://www.triumphantpropertygroup.com.au
    Email Me

    NSW Buyer's Agent specialising in Western Sydney-Blue Mountains-Orange-Albury

    Profile photo of DerekDerek
    Member
    @derek
    Join Date: 2004
    Post Count: 3,544

    Hi Tony,

    It is also called the Retirement Standard. Google is onto it. Just make sure you are looking at the latest figures.

    http://www.superannuation.asn.au/RS/default.aspx

    Gets updated regulalry (quarterly – from memory) and currently states couple need $55K/annum to be comfortable in retirement. Note the standard assumes the home is paid of, something that is becoming less common over time.

Viewing 4 posts - 1 through 4 (of 4 total)

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