Rental yield is the income return rate, over the costs associated, with your investment property.
It’s frequently used as a metric in property data and expressed as a percentage.
The 2 types of rental yield are Gross and Net.
Gross rental yield is worked out with the annual rental
income and the property value:
Annual Rent Income=52 x weekly rent
Property value= purchase or market value
Gross rental yield=Annual rental income/property value x 100
Ie: a property purchased for $390,000 and returns an annual
rent of $26,000 would have a current rental yield of 6.67%.
Gross rental yield does not take into account the expenses
associated with keeping the property.
Net rental yield is a more accurate prediction of rental
return.
You will need to estimate all the costs and expenses
associated with your investment property such as:
·
Purchasing and transaction costs
·
Ongoing fees and expenses
·
Vacancy costs
·
Loan costs
·
Building and pest inspections
·
Vacancy costs
·
Strata reports
·
Stamp duty
·
Legal fees
·
Mortgage repayments
·
Repair and maintenance
·
Strata levies
·
Council rates
·
Property management/advertising fees (slash
these by using RealRenta)
·
Loss of rent due to vacancy periods
·
Insurance
·
Depreciation
Once you have added up all these costs, you can use the
following formula to work out the rental yield:
Net rental yield= annual rental income- annual
expenses/total property cost x100
Ie : if the overall purchase price of your property is
$430,000 and the weekly rent is $500 and the annual expenses are $4,500, then
the current rental yield would be 5%.
Are you sick of handing over your income from your investment property
directly to a property manager?
Use RealRenta instead and get your rental income paid directly into
your Bank account!
Marlene Liontis
Thursday, 20 June 2019
