Calculating Rental Yield

When buying an investment property, one of the important figures to look at is the net return on the money you have invested, also
known as the net rental yield. This should be one of the comparison considerations when acquiring your next investment. Too low a
return may mean that alternative investments should be reviewed, while a very high yield may mean there is an accompanying risk
factor that is higher than normal. Areas that produce lower yields can predominately have a higher capital gain, which might be the
ultimate long-term aim. The yield is calculated by starting with the purchase price. This is the denominator. The numerator is
your ‘net’ yearly income. To figure out the net income you take your yearly gross rent and subtract your outgoings. Outgoings for
residential properties include management fees paid, advertising, insurance, council and water rates for the year, estimated repairs,
maintenance and strata levies, land tax (if applicable), etc.
Purchase $400,000 | Annual Rent $20,800 | Expenses $6,000
Net Rent $14,800 divided by property value of $400,000 = Rental Yield of 3.7%
By utilising this method you can not only look at the features of the property, but compare yield on each investment. We always
suggest that you seek professional advice before making any investment