From 3.75% to 4% yield

[Belu]

http://www.theage.com.au/business/property/wary-buyers-sellers-spurn-market-20111113-1ndp1.html

Personally I don't see how 4% could be considered the bottom of the market, this is so tight as a gross rental yield (and more like 3.2% as a net yield).

What are people's thoughts on target yields? Are you happy with 4%? Whats your target?

Personally I go for development blocks with the aim of a short-term turnover so yield is less important, but would be very interested in others views.

Cheers

Ben

 

[vaughan]

My target is minimum 6.5% net after everything, this equates to over 8% gross for houses. They are hard to find but are around.

Good luck with any strategy that is short term at the moment, other than wealth minimisation.

 

[Belu]

Vaughan, why wipe off short-term if there is a plan behind it?

Some people would tell you to forget about 8% gross yields, yet you are doing it. The same can be said for short-term wealth creation.

 

[vaughan]

Because right now, short-term don't look great.

I don't think property prices have reached bottom yet in most markets, and there is much uncertainty in the global economy. Short term I'd say things are not positive for strategies that require property to increase in value short term.

But don't let me stop you, I don't have any inside knowledge and I tend to be risk-averse.

It's not a good time to go swimming when the tide is going out, but it is a good time to go looking for shells on the beach.

 

[Belu]

I am talking about creating wealth, not waiting for it to happen

 

[vaughan]

IMHO yield has no bearing on what you're planning, as far as I can see. At least with regards to "yield" in the linked article, which seemed to me to be filler story based on some stats the journo found.

My take on what you want to do, the risks are:

holding costs
market movement affecting the purchase price at sale
development cost blow-out

In this case, the shorter the term the better since the first two are minimised. Development costs might be a bit more if it needs to be finished quickly.

So to continue my "tide" analogy, if your strategy relies on a favourable tide then move fast before it changes, or plan for it to finish at the right time and wait a few cycles.

 

[jingo]

http://www.theage.com.au/business/property/wary-buyers-sellers-spurn-market-20111113-1ndp1.html


What are people's thoughts on target yields? Are you happy with 4%? Whats your target?

Cheers

Ben

I won't be buying any more resi IP's. I'm starting to look at commercial property where I'd be interested in yields of around 9%. Using resi equity at say 6.8% or so would mean the investment will be positively geared.

Regards Jason.

 

[Aaron_C]

I won't be buying any more resi IP's. I'm starting to look at commercial property where I'd be interested in yields of around 9%. Using resi equity at say 6.8% or so would mean the investment will be positively geared.

Regards Jason.

We have a family friend who did that. Bought a commercial property for a 9% yield and the tenant was CBA! But then CBA was on a monthly lease....and you can guess what happened next..

 

[Bon]

Guys, the yield doesn't really matter.... Capital growth is the more important thing!

If you find a good quality property, just buy it regardless of what the yield is because you can always write off your losses against your income at tax time and get ~50% back.

 

[Token Funder]

Guys, the yield doesn't really matter.... Capital growth is the more important thing!

If you find a good quality property, just buy it regardless of what the yield is because you can always write off your losses against your income at tax time and get ~50% back.

 

[sash]

Hmmm...surely you must jest??

Guys, the yield doesn't really matter.... Capital growth is the more important thing!

If you find a good quality property, just buy it regardless of what the yield is because you can always write off your losses against your income at tax time and get ~50% back.

 

[Aaron_C]

Hmmm...surely you must jest??

He's right about buying well-located property. But that doesn't mean you buy it at any price.

 

[Rooster]

Guys, the yield doesn't really matter.... Capital growth is the more important thing!

If you find a good quality property, just buy it regardless of what the yield is because you can always write off your losses against your income at tax time and get ~50% back.

That's two clangers in one night.

You keep throwing lures like that and I guess you'll hook someone eventually....

Rooster

 

[jingo]

But then CBA was on a monthly lease....and you can guess what happened next..

I guess this was the problem when he bought it - I'm intending to buy something on a long lease - 7-10 yrs.

Regards Jason.

 

[Deltaberry]

http://www.theage.com.au/business/property/wary-buyers-sellers-spurn-market-20111113-1ndp1.html

Personally I don't see how 4% could be considered the bottom of the market, this is so tight as a gross rental yield (and more like 3.2% as a net yield).

What are people's thoughts on target yields? Are you happy with 4%? Whats your target?

Personally I go for development blocks with the aim of a short-term turnover so yield is less important, but would be very interested in others views.

Cheers

Ben

Tell me why I'd be happy when I can invest in jurisdictions that give that yield and borrow at 2% in an economy with 5% GDP growth?