FHBs make way for investors
- Thread starter Propertunity
- Start date
Jo
I don't disagree with you, I was just pointing out what the definition is. If you want to use net yield, then say net yield and that's fine.
This off dictionary.com: yield: the income produced by a financial investment, usually shown as a percentage of cost.
I personally find the yield percentage is pretty unhelpful, except as a very rough guide when trawling through realestate.com. I always stick any numbers in an excel spreadsheet to see what the actual net result will be in dollars.
As the old saying goes, I bank dollars, not percentages, so when I'm trying to convince the ministers for war, finance and homeland security (the wife...) of an investment then I tell her how many dollars it will cost, not what percentages are...
Noel
I don't disagree with you, I was just pointing out what the definition is. If you want to use net yield, then say net yield and that's fine.
This off dictionary.com: yield: the income produced by a financial investment, usually shown as a percentage of cost.
I personally find the yield percentage is pretty unhelpful, except as a very rough guide when trawling through realestate.com. I always stick any numbers in an excel spreadsheet to see what the actual net result will be in dollars.
As the old saying goes, I bank dollars, not percentages, so when I'm trying to convince the ministers for war, finance and homeland security (the wife...) of an investment then I tell her how many dollars it will cost, not what percentages are...
Noel
What the agent is saying is pretty normal (for them).
But we, as more sophisticated investors, know what the real differences are.
Make sure you ask the agents for a list of all the outgoings, including any Body Corp, Council rates, water rates etc.
They usually don't know this, and will try to wriggle out of finding out (more work), but simply state that you are an investor, and if you are to proceed any further you need to know ALL the expenses and outgoings.
Yes, I'll. Thanx.
I don't buy units, villa's, etc, only houses and this is why I have no problem using normal yield calculations. If I'm close to 4% yield and the property has good potential for capital growth, I'll buy it.
How about as time passes?
Do you still report the yield as return/purchase price (in which case it will continue to improve) or adjust it to return/valuation? I don't even know what my house is worth and I am not planning on getting it valued any time soon, so to me, return/amount owing makes most sense.
RE
Fair question, but I would look at it as the return on current value, as then it gives me an idea how that investment is looking compared to the big obvious alternatives: Shares, or a different property.
i.e. If it's worth $450K and i'm getting 4%, or I could put that $450K into shares and get 6%, then I know how it is comparing. Not that I'd sell it and buy the shares, but I think you need to know how the opportunity cost is looking. Especially if the yield tracks down quite low, you could possibly sell and buy other property with a better yield and end up with more assets.
But like I said before I'm not really too interested in the percentage anyhow. For a purchase I would be more likely to crunch some numbers and say "This $450K property will cost me $5000 per year after tax, so I need to decide if the Cap Growth will be enough to make that worthwhile, especially with increasing interest rates..." ongoing I would probably say "this property cost me $5000 per year initially, now 5 years later that has improved to only costing me $1000, is this what I had hoped for, or is it a dog and I should sell, or is it a great star in my portfolio...?"
Who cares if that means 5% gross, 3.5% net, or 14% on purchase price?
Fair question, but I would look at it as the return on current value, as then it gives me an idea how that investment is looking compared to the big obvious alternatives: Shares, or a different property.
i.e. If it's worth $450K and i'm getting 4%, or I could put that $450K into shares and get 6%, then I know how it is comparing. Not that I'd sell it and buy the shares, but I think you need to know how the opportunity cost is looking. Especially if the yield tracks down quite low, you could possibly sell and buy other property with a better yield and end up with more assets.
But like I said before I'm not really too interested in the percentage anyhow. For a purchase I would be more likely to crunch some numbers and say "This $450K property will cost me $5000 per year after tax, so I need to decide if the Cap Growth will be enough to make that worthwhile, especially with increasing interest rates..." ongoing I would probably say "this property cost me $5000 per year initially, now 5 years later that has improved to only costing me $1000, is this what I had hoped for, or is it a dog and I should sell, or is it a great star in my portfolio...?"
Who cares if that means 5% gross, 3.5% net, or 14% on purchase price?
Yeah, I'm kind of hoping for a tenant for that magic $60pw spending dosh 
I always work out my yield on the purchase price, because that's what I paid for it. My investment cost $X, it now returns $X.
If you really want to pump yourself up, base the current yield on the actual dollars of your own folding stuff that you put into the investment.
NOW, you're talkin' giddyup!!
Lol, maybe for my current house (which I've put about $5k of my own money into other than paying the IO loan and we'll get over $100k back when we sell and will keep a $50k block of land) but for that house, I've actually put more cash into it on renovations than is owing so it would drop the yield. My old house ticks most of the boxes of "bad investment" but all of the boxes for "hippy cheap big outback place to be a hermit in". However, in the time I've had it, I've put considerably less money into the house than I would have spent renting in the same period, and that same money would be about 1/3 what I would have spent renting in a larger town in that same period, so it all averages out.
I need to put more ads out in my quest for a tenant too ... ye gods, I might even need to put one in the *newspaper*!
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