How to calculate rental yield?

Hi FireCaesar,

Rental yield = (weekly rent * 52) / purchase prize x 100

Eg: Rent = $100 p/w
Purchase price = $50,000

Yield = (100 x 52) / 50000 x 100 = 10.4%

Regards,
Ozi

G’day again Nero [biggrin]

Monopoly answered me back in May this year on precisely this question. Hope she doesn’t mind if I quote her:
“There are so many ways of doing it (my way; which is probably the longer way) of doing it is as so:
Weekly rent (170 x 52 = 8,840 annual rent) divided by cost base for property (100,000) multiplied by 100 = 8.84%

Using Karl and Rita’s figures:
170 * 52 / 100,000 * 100
8,840 / 100,000 = 0.0884 X 100 = 8.84

Another example:
220 p/w X 52 = 11,440 (annual rent) divided by cost price of say 150,000 – hence
11,440 / 150,000 = 0.0762 X 100 = 7.62%
Have fun!!!!”

Perhaps search my posts around May 2004, as there were quite a good number of replies on that thread.

Cheers
Greg

Originally posted by FireCaesar:
crj, thanks for your contribution.
Greg, those examples really did help. I know how to calculate now.
*Nero huh? Hehe … (That was pretty funny I thought) So what do you consider a good rental yield (as a %)? with closing cost and without …

Hi again Nero, [bonjour]

Are you still fiddling while Oz’s bushfires rage, FireCaesar? [biggrin]

Re the type of rental yield to aim for, I’m more into balancing my -ve CF (+CG) properties with my +CF (and, happily, +CG) properties), and still be about $20,000pa +CF in front over my entire portfolio.

It’s harder to get properties at greater than 10.4% yield these days (ie., Steve’s 11 second formula). This fact has happily forced me into “looking sidewards” for a different angle (Steve’s byline: “Success comes from doing things differently” has helped me immensely with my new outlook). So I find myself chanting “buy wholesale, sell retail” as my mantra in today’s market, rather than being solely focused on Rental Yield, as I have in the past.

Whatever works for you, Nero, do that. And meditate really deeply about Steve’s byline, especially on how you might be able to apply it to your unique circumstances.

Cheers and Good Fortune
Greg

Hi again
Wholesale Ip’s? You do them yourself. It’s called “doing land sub-divisions” and/or house and land packages, chief. [cigar][buz2][biggrin]

Cheers
Greg

Hi Fire

Life’s too short to feel silly, right? The main thing for ALL of us is to:
1. Keep learning and (more importantly…)
2. ACT on these new learnings

Q: Do people buy plots of land and build houses on them for sale?
A: If you buy a block which someone else has sub-divided, you’re paying retail, because he’s built his profit into the price you paid. But if you subdivide the land yourself, and either build on it or sell it for a (much higher) market price, you’ve paid wholesale and sold it at retail.

If you’re new at this game, here’s a simple way you may be able to start. I live in the Sunshine Coast Hinterland in a small country town (Pop 20,000). 6 months ago, a beautiful old Q’lander house on a 1/2 acre block in the street next to our PPOR sold for $160,000. I was away on holidays, so didn’t know it was coming onto the market, and missed out on the deal. The figures would have worked something like this:
~ I buy house on 1/2 acre for $160,000 (not any more in my town at anywhere near that price!!)
~ I pay council “Headworks” charges etc, and cut off 1/4 acre at the back of the block
~ I sell the house on 1/4 acre for very close to $160,000 (that’s right!!) and get a virtually free block of land worth $80,000 – $90,000.

What you do with the land, is up to you. I probably wouldn’t have sold the house, just get it revalued to help finance building 2 x 2BR duplex units (brick).

After you’ve done a number of these deals, move on to bigger subdivisions. Budget to spend a modest amount attending a couple of well-regarded development seminars, such as Peter Comben’s:

http://www.smartpropertydevelopment.com.au

Also check out these sites:
http://www.chrisbatten.com.au
http://www.yourproject.com.au

There are many others, but that should get you started. Remember, it’s all about acting on advice offered by experienced operators. [cap][cigar][buz2]

Cheers
Greg