Rental Reality:
This is well explained on
www.navra.com.au, but to paraphrase:
1. Find a property that you might consider buying.
2. Identify (eg. via a Property Manager etc) what the actual YEARLY rental is likely to be for that property.
3. Find out (via a statistical organisation such as Residex) the average 5-year yield (in %) for the suburb that the property is located in.
4. Divide the YEARLY rental by the 5-year % to give you your rental reality figure.
5. If you can buy the property for less than the rental reality figure, you're doing good! If not, look again.
Example:
(Whether this is realistic or not - no idea)
Property is likely to rent for $185 per week. Average 5-year yield for the suburb is 4.85%.
Yearly Rental = 185 * 52 = $9620.
$9620 / 0.0485 = $198,350.
The $198,350 amount is your rental reality figure. If you can buy the property for less than this amount you have found a property at a realistic price.
It's important to not be too pedantic about the numbers. For example, even if the property is $203,000 it might still be reasonable value, but if it's $255,000 it is overpriced as far as "Rental Reality" is concerned.