That's interesting. Agent is working out yield on income - all expenses divided by a sale price which gives me the best indication of yield. Or have I misunderstood Scott?
Net rent = gross rent less council rates, water rates, PM fees, land tax, building insurance etc.
Capitalisation rate is net rent/sale price. eg if it brings in $120k pa gross and there are $20k in outgoings then your net rent is $100k. If the asking price is $1M, then:
$100k/$1M = 10% capitalisation rate (yield)
You need to look at what properties have sold for in the area with similar characteristics. The yield an investor will purchase it at, will be related to the risk. ie if it is a new building with a MNC tenant on a 10 + 10 yr lease and it is in a prime location then it is generally low risk and an investor may only want 6% yield.
If it's a dilapidated building in a bad position with expired leases to poor tenants, investors may want 10% or more.
When marketing an investment property, you need to ensure all leases are current (more attractive to investors, and will make it easier for them to obtain finance) and any potential problems are sorted out before marketing. If the property has numerous issues, investors often won't touch it as it starts to get too 'messy' and complicated. And more issues = higher yield = lower sale price.
It is important to look at what marketing your agent is doing. If his marketing is very basic and makes it difficult to discern the necessary information to make a purchasing decision, you will not have as many buyers as you may have otherwise had. This will lead to an inferior result.
I hope this helps!
Enjoy your weekend.
John