Rental Return Question...

[bennos]

Say I buy an IP for 325,000 and the weeky rent is 340.00.

How is the return rate % worked out?

 

[alexlee]

Say I buy an IP for 325,000 and the weeky rent is 340.00.

How is the return rate % worked out?

340 per week x 52 weeks / 325,000 purchase price = 5.44% gross rental yield.
Alex

 

[bennos]

Perfect! Thanks Alex. Is that good (5.44%)?

What's considered low, reasonable and high?

 

[Twitch]

Perfect! Thanks Alex. Is that good (5.44%)?

What's considered low, reasonable and high?

It depends on the location and type of the property. For a house in a blue chip suburb that would be a stunning return, for a unit in a one horse town it would be terrible.

 

[bennos]

It is a new 3 bedroom unit in Westmead NSW. Walking distance to public and private hospital, UWS university train station and small group of shops. One train stop away from Parramatta and direct train line into the city (about 20km away)

 

[Rixter]

It is a new 3 bedroom unit in Westmead NSW. Walking distance to public and private hospital, UWS university train station and small group of shops. One train stop away from Parramatta and direct train line into the city (about 20km away)

Your mission is to determine what other similar properties are returning & that comparison will determine if yours is high , average , or low.

Happy "DD"ing to you.

 

[alexlee]

It is a new 3 bedroom unit in Westmead NSW. Walking distance to public and private hospital, UWS university train station and small group of shops. One train stop away from Parramatta and direct train line into the city (about 20km away)

For a unit you also have to take into account body corp. If the block has a pool, lift, bbq area, gym, etc your rental yield should be higher, but that's because your body corp will also be high.

Rental yield is not the only thing to consider.
Alex

 

[bennos]

Head's spining with info overload haha! It's overwhleming for a novice... I need to sort out a routine of 'where to start' in terms of researching and stay focussed on one path, I'm getting too distracted with reading different topics. There is so much advice/info here and in general on the net and it is too easy to go off and start reading something else. Call me scatterbrain!

Thanks for the replies.

BTW, what is "DD"ing and PPOR?

 

[alexlee]

BTW, what is "DD"ing and PPOR?

DD = Due Diligence (research, basically)

PPOR = Principle Place of Residence (the place you live in, as opposed to an investment property)

The figure you're interested in, when evaluating whether you can hold a property, is NET CASHFLOW. High rent isn't always great. Some city apartments have high rental yields but net it's not as good because it has very high body corporate, for example. You have to look at the whole picture.
Alex