Rental yields – what you need to know

Rental yield – essentially the rate of rental income returned against the costs of an investment propertyis a great indicator of a property’s investment potential.But you need to keep things in perspective when you factor it into your decision to purchase property.

Calculating rental yield

A good first step in examining rental yield’s impact on the investment potential of a property is to recognisethat there are two types of rental yields, gross and net, and they are calculated differently.

In property, gross rental yield is calculated by dividing the annual rental income you receive by the property value, and then multiplying this figure by 100.

For example, if you collect $20,800 rent annually ($400 per week) and your property value is $450,000, it will look like this:

$20,800 (annual rent) / $450,000 (property value) = 0.0462

0.0462 x100 = 4.622

The gross rental yield is therefore expressed as 4.622%

Presumably, the higher the rental yield percentage, the better, as it suggests a more efficient return on your investment – more bang for your buck.

Knowing a property’s gross rental yield is a quick way to make a rough comparison of how its rental returns fare with others in an area, but it does not give a full picture of the investment potential a property offers.

But the gross rental yield can be misleading.

Net rental yield, on the other hand, offers a more detailed picture of a property’s rental return. To calculate net rental yield, you also factor in the costs and expenses you incur in addition to your property’s value.

The list of costs and expenses is extensive andcan include stamp duty, legal costs, building inspections and recurring expenses such as maintenance and repair work, council rates and loan interest repayments.

If you deduct $5,000 for annual costs and expenses from the annual rental income in the gross rental yield scenario in the example above, the net rental yield is 3.5%.

Of course, the credibility of net rental yield is dependent on the accuracy of assumptions you make about the cost of repairs, the property’s market value and the property’s occupancy rate.

A building inspection might reveal dormant issues that will drastically increase future repairs and maintenance expenses. Rental yield might be high for those properties occupied in the neighbourhood, but that doesn’t mean the property you have in mind will be occupied all year-round – vacancies in one street can vary from the next, too.

Rental yield is only one factor to consider

Calculating rental yield should only bepart of your assessment of a property’s investment potential.To dodue-diligence and ensure you’re making the right investment, it’s alsoimportant to consider the resale value, investigate market reports,demographics, sales and rentals history in an area, planning and infrastructure,and the story of the building.

MFAA-accreditedfinance brokers can help you further evaluate the benefits and the issues toconsider when purchasingyour investment property.

Should you have any questions or comments, please do not hesitate to contact me.Champion Accountants Group Pty Ltd
ABN : 141194096
Chris Teck Ling
Phone : 0404 622 783
Mobile: 0433 338 819
Email : info@championaccountants.com.au

79 thoughts on “Rental yields – what you need to know

  1. Needed to put you this tiny observation in order to thank you so much again over the awesome methods you have shared on this site. It has been open-handed of people like you to convey without restraint what many of us might have marketed as an e book to help with making some money on their own, primarily now that you might have done it if you considered necessary. These solutions in addition served to become a easy way to understand that some people have a similar eagerness really like my own to find out a whole lot more when it comes to this matter. I think there are many more pleasant instances in the future for those who view your site.

  2. gross rental yield is calculated by dividing the annual rental income you receive by the property value, and then multiplying this figure by 100

  3. Just stopping by… and I needed to drop a note because this morning I noticed a web page writing about something something identical.The information wasfascinating I admit.

  4. I don抰 even understand how I stopped up here, but I thought this post used to be good. I don’t recognise who you’re however certainly you’re going to a well-known blogger in case you are not already 😉 Cheers!

  5. I beloved up to you will receive carried out proper here. The sketch is tasteful, your authored subject matter stylish. nonetheless, you command get bought an nervousness over that you would like be turning in the following. sick indubitably come more in the past once more as exactly the similar nearly very incessantly within case you protect this increase.

  6. I would like to thank you for the efforts you have put in writing this website. I’m hoping the same high-grade website post from you in the upcoming also. Actually your creative writing abilities has inspired me to get my own website now. Really the blogging is spreading its wings quickly. Your write up is a good example of it.

  7. Hi there just wanted to give you a quick heads up. The text in your post seem to be running off the screen in Safari. I’m not sure if this is a format issue or something to do with internet browser compatibility but I figured I’d post to let you know. The design and style look great though! Hope you get the issue fixed soon. Thanks

  8. Thanks, I ave recently been looking for information about this topic for ages and yours is the best I ave found so far. Pauletta Judd Clarita

  9. Thank you for the auspicious writeup. It in fact was a amusement account it. Look advanced to far added agreeable from you! However, how can we communicate? Zelma Pietrek Snider

  10. This is very interesting, You are a very skilled blogger. I have joined your rss feed and look forward to seeking more of your magnificent post. Also, I have shared your web site in my social networks! Cherye Germaine Monica

  11. Wow, amazing weblog structure! How lengthy have you ever been running a blog for? you made blogging look easy. The overall glance of your web site is excellent, let alone the content material! Trudey Dorie Compton

  12. Hello! I simply wish to give you a huge thumbs up for your great information you have right here on this post. I am coming back to your web site for more soon. Lucky Omar Woo

  13. Howdy, I think your site could possibly be having web browser compatibility problems. Whenever I take a look at your website in Safari, it looks fine however, if opening in Internet Explorer, it has some overlapping issues. I merely wanted to give you a quick heads up! Aside from that, excellent blog! Kym Duffy Jodee

  14. Everything is very open with a really clear explanation of the challenges. It was truly informative. Your site is useful. Thank you for sharing. Arleen Dolph Land

  15. Hi there. I found your website via Google while searching for a comparable topic, your website got here up. It seems good. I have bookmarked it in my google bookmarks to visit then. Sharai Demetre Medardas

  16. What a story, Ann! I find that sharing fears can help lessen them, especially when we share them among others who lift us in prayer. Grateful to be on this journey with you. Jori Roger Fredek

  17. Hi my friend! I want to say that this post is amazing, nice written and include almost all vital infos. I would like to see more posts like this. Eimile Ingram Leann

  18. Hello to every one, the contents existing at this web page are actually amazing for people knowledge, well, keep up the nice work fellows.| Keri Leonardo Chery

  19. Curabitur tincidunt justo sit amet enim molestie, quis ornare nunc ornare. Nullam tincidunt ex non augue vulputate, non commodo arcu consectetur. Aenean eget sagittis ex, ut blandit neque. Shanon Elijah Gurevich

  20. Hey there. I found your blog by means of Google at the same time as looking for a related matter, your web site got here up. It seems to be good. I have bookmarked it in my google bookmarks to visit then. Gabi Wallache Ruberta

  21. I was suggested this blog by my cousin. I am not sure whether this post is written by him as no one else know such detailed about my difficulty. You are amazing! Thanks! Cal Avigdor Moorefield

  22. Thanks for all of your labor on this web page. My mom enjoys conducting investigation and it is obvious why. Most people learn all regarding the powerful method you give both interesting and useful tips through the web blog and recommend participation from some others on this concept then our own simple princess has been starting to learn a lot. Take advantage of the rest of the new year. You are carrying out a useful job. Claire Harp Patterman

  23. Interesting article. It is very unfortunate that over the last several years, the travel industry has already been able to to tackle terrorism, SARS, tsunamis, bird flu virus, swine flu, as well as first ever real global downturn. Through everthing the industry has really proven to be powerful, resilient and dynamic, getting new approaches to deal with hardship. There are always fresh troubles and chance to which the sector must yet again adapt and reply. Adorne Edan Zebulon

  24. That was amazingly beautiful and so on track with what I feel happened in 2017. Looking forward to a powerful and stronger and more genuine 2018. Thank you Ardella Herold Gibbons

  25. Brilliant post this match. I was checking constantly this vortal and Im ecciting! Extremely useful info specifically the last post 🙂 I was looking for this particular info for a long time. Thank you and good luck…

  26. Thank you so much for this! I havent been this moved by a blog for quite some time! Youve got it, whatever that means in blogging. Well, You are definitely someone that has something to say that people should hear. Keep up the good work. Keep on inspiring the people!

  27. Dude, please tell me that youre going to publish much more. I notice you havent written an additional weblog for a while (Im just catching up myself). Your blog is just too important to become missed. Youve acquired so much to say, these knowledge about this subject it would be a shame to see this weblog disappear. The internet needs you, man!

  28. Nice read, I just passed this onto a colleague who was doing a little research on that. And he actually bought me lunch since I found it for him smile So let me rephrase that: Thank you for lunch!

  29. I was just chatting with my coworker about this today at Outback steak house. Don’t remember how in the world we landed on the topic in actuality, they brought it up. I do recall eating a excellent fruit salad with cranberries on it. I digress

  30. Hello there! I could have sworn I’ve visited your blog before but after looking at a few of the articles I realized it’s new to me. Regardless, I’m definitely pleased I stumbled upon it and I’ll be book-marking it and checking back frequently!

  31. I really love your site.. Very nice colors & theme. Did you build this website yourself? Please reply back as I’m planning to create my very own blog and would love to know where you got this from or exactly what the theme is named. Many thanks!

Leave a Reply

Your email address will not be published. Required fields are marked *