How do I calculate rental yield?

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From: Dan D


Hi all,

I had a sample calculation in one of my investment mags, but the mag is now in hiding just when I need to know how to work out rental yield on a property.

What's the magic formula?

Assistance much appreciated!

Dan.
 
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Reply: 1.1
From: Dan D


Thanks, Terry.

Next question, what is considered a good rental yield?

Dan.
 
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Reply: 1.1.1
From: Alan Hill


Your Rental Yield is usual inversely proportional to Capital Growth....not always.....but generally in Capitals such as Sydney etc. ie. you usually have to sacrifice a bit of rental yield for Capital Growth. Average Rental Yields of about 5% were common in Sydney 18 months ago but it is probably closer to 3-4% now in many areas.

In many regional areas you'll usually get a much better Rental Yield but generally lower Capital Growth. Rental Yields in excess of 10% are common.

I know their are plenty on this Forum who will be doing better than the above and the above are only indicative.


:)
 
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Reply: 1.1.1.1
From: Tibor Bode


Hi Dan,

All above notes correct from my point of view.

But as an investor you will have to go beyond rental yields only. Instead of boring you death with some details, I would suggest to get "Real Estate Riches" from Dolf de Roos
or some of Jan Somers' book (the latest is advertised on this site) and also would highly recommend Terry Ryder and Margaret Lomas' books. Apart from these there are several more and generally the more you read on this subject the better financially educated you will become. The above ones are quite easy to read. Apart from these there is also Robert Kiyosaki's all books, John Burley's "Money secrects of the Rich" and several classics like Think and grow Rich, etc. Have a look at in the library or it is even worth to buy the majority of them from the bookshops, usually under Investments
Good luck and good reading and hunting.

Tibor
 
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Reply: 1.1.1.1.1
From: Terry D


Hi Dan

Ideally you would want good rental yield & good capital growth , but as Alan pointed out
you have to sacrifice a bit of one to achieve the other. I agree with Tibor, buy/read as many books as possible.I have copied the following from another forum and believe it is appropriate.

When considering which property to buy next I consider the portfolios needs in order to balance the cashflow and growth equation to such an extent that our cashflow is maintained and growth is achieved. You really need both of these to happen so that you can borrow money for the next property. One property may provide lots of growth enabling your equity to build up another may provide the cashflow so you are able to service the loan.

Terry
 
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Reply: 1.1.1.1.2
From: Dan D


Thanks to all for your informative replies.

I'll certainly have to stock up on those books mentioned. I checked the libraries but these books are spending more time off the shelves than being on them waiting for some work to come along. So, will have to fork out the brass for them. A tiny price to pay given how much I paid in uni fees in the past with not much to show for it except keeping the ATO happy :-|

Dan.
 
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Reply: 1.1.1.1.2.1
From: Les .



G'day Dan,

Jan's new book "More Wealth from Residential Property" has (imho) an excellent chapter that puts the growth and yield into perspective. Look at Chapter 9 "Position, position, position".

It is worth the price of the book just for this chapter alone.

Regards,

Les


- "Eschew Obfuscation" - ;^)
 
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Reply: 1.1.1.1.2.1.1
From: Joanna K


Yield Calculator attached


Kind regards

JOANNA
 
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Reply: 1.1.1.1.2.1.1.1.1
From: Steve Navra


Excellent stuff Johanna!!!

May I include this with the free spreadsheets that I give away at my courses?

Acknowledgement and thanks to Johanna K of course!

Regards,

Steve
 
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Reply: 1.1.1.1.2.1.1.1.1.1
From: Joanna K



Steve,

You may use it where you like. Someone else actually posted a written version of this on the forum some months ago which I saved and converted, so I can't take the credit.

Kind regards

JOANNA
 
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