rental yeild ??

N

not so lucky

Hi folks
Matusik's article in the API says that the published rental yeilds around 3% in Bris are deceiving, and the real yeild on IPs is much higher, eg >5% in many cases. What is the feeling with you about achievable yeilds on Bris properties at the moment and where do you think they might be going. I have seen some predictions that vacancy rates could be increasing, which seems to be supported anecdotally.
I am starting to look at Bris for an IP but think that anything less than 5% will be costing me too much and I am better to put my money in shares.

I would really appreciate your feelings and experience with this.

Ta

lucky :D
 
G'day
He is saying that the published yields are calculated from Median prices and median rents, but the actual rents for purchased IPs produce better yield than that calculation.
I am taliking about gross yield, ie rent / cost without considering the net management and overhead fees.

:cool:
 
My latest acquistion in inner city Brissy (July 2004) yields a gross of 4.5%, which is pretty standard from what I found up there. Mind you, I was only looking at houses so I can't comment on units at all.
My other IP up there yields better at just over 6% but this house was bought over 3 yrs ago now. If I was purchasing now, I wouldn't expect much more than around 3.8% so it also depends on area, location, attraction to tenants etc.
Don't forget to take maintenance into account, especially in Qld. Some of those old Qlders and timber houses can really eat into your cash reserves. Just ask me- I always seem to be forking out for some breakdown or deterioration :)
 
NOOB ALERT!

What exactly does the Yield % take into account?

I have owned properties for about 5 years now and never used it as a marker or purchase guide.

LOL - It is probably something I am very familiar with but never given it the correct title...

<KS>
 
Hi Guys & Gals,
I am a "Brizzy Boy', only new to this stuff but my 3 IPs earn me between 6.5 and 7.5% gross, assuming that that is calculated on rental return to purchase price (bought these 3 Ips in last 13 months), as far as vacancy rates are concerned, I will put it this way. went and visited the inlaws today, now they live on a yatch moured at Scarbourgh on the Redcliffe Peninsular. My mother inlaw is very ill and have had to move off their yatch into more comfortable surroundings, eg a unit. They turned up at a unit last week for an inspection of the place and thought that it was an auction or garage sale or something like that, as there were so many cars and people about and this was a 2 bed unit "nothing special" up for rent!!! By the way this was only last week at Margate on the Redcliffe Peninsular.
Makes you think who determins vacancy rates?

John
 
<KS> said:
What exactly does the Yield % take into account?

I have owned properties for about 5 years now and never used it as a marker or purchase guide.
Click to expand...
Hi KS,

The yield % basically is the calculation used to show the gross rental return based on purchase price paid for the property.

For example:
Purchase price of property = $200,000
Weekly rent = $200 / 52
Yearly rent = $10,400 / 200,000 (purchase price) * 100
Gross Yield = 10.2%

I'm sure you probably did take it into account, but you may have used a different name for it. Most people, even those more CG focussed (like myself) take rental yield into account when contemplating a new acquisition, however it is not the primary concern as that is more an issue for people heavily focussed on cashflow. For me personally, as long as there is CG potential in the property, the yield % albeit important is not too much of a concern (as I can always work on changing this by making a few alterations and increase the rent down the track accordingly). At the end of the day I guess, as long as I am confident it will happen, I don't mind delayed gratification!! ;)

Cheers,

Jo
 
Monopoly said:
.

For example:
Purchase price of property = $200,000
Weekly rent = $200 / 52
Yearly rent = $10,400 / 200,000 (purchase price) * 100
Gross Yield = 10.2%
Click to expand...
Don't you mean 5.2%???

Ruby :)
 
Thanks Monopoly!!

So based on that my first property:

P.Price = $80,000
Weekly rent = $135 / 52
Yearly rent = $7020 / $80,000 * 100
Gross Yield = 8.775%

And when I boost the rent to $140/wk next month that jumps to 9.1%

What is a bad/decent/good/great/brilliant figure?

I was just wondering because when my latest IP is finished it works out to 5%, but is a much bigger investment. Does size of the investment have an impact on what % is good?

<KS>
 
KS,

That is a fantastic return!!! :D

What do you mean by "size"??? If you're talking about the size of the property, it would have a greater market value, but the yield is not relying on market value it is reliant on purchase price, thus in answer to your question.....size doesn't matter!!! ;)

Cheers,

Jo
 
<KS> said:
What is a bad/decent/good/great/brilliant figure?

I was just wondering because when my latest IP is finished it works out to 5%, but is a much bigger investment. Does size of the investment have an impact on what % is good?
Click to expand...
In my view (others, like Monopoly, will disagree) 10% is good. That's because I am cashflow oriented. My rule of thumb is that I like at least 3% above the current interest rate. Finding them is hard work at present.

Generally speaking, I have found that the size of the investment is irrelevant, as your major cost is interest and the other costs, although variable between properties are not so much a factor of investment size as of property location, construction and condition. Council rates, need for painting, likelihood of structural repairs are some of the factors at work here.

Note that my comments are limited to residential property - including commercial or industrial starts to compare apples with oranges.
 
Thanks heaps for you info and comments. So my plan is to get a 5% yield property in Bris around 10k from city. Is this currently realistic, and what yields are folks buying at right now? Any ideas on the best locations, my feeling is Chermside/Geebung, and around The Gap.

:D lucky
 
not so lucky,
imho,i think 5% within the 10ks from the CBD will be hard
to find, why do you think Chermside/Geebung the Gap
are area to watch, all those areas are different in everyway way..
good luck
willair..
 
Hi Quiggles,
remember I am only learning, so I am trying to gleam as much info from the educated crowd within this forum. My understanding of your last post is that as a rule of thumb, regardless of the size of the investment if the intrest for the loan is @ 7% I should look at properties that will bring in about 10% gross to be close to if not CF+

Regards John
 
Not so lucky,

Why would you bother?

Do you believe there will be substantial property value growth in the next few years?

Cheers,

Aceyducey
 
Hi Acey
I know there has been a lot of growth over the past few years but I hope there is still some left. From what I have been reading there looks like 10%+ CG in Bris over the next few years. If I can get around 5% rental yield on top then I am happy :) other wise it will be costing me money :(
I think the share maket will be performing better than property for the next few years but I am just starting out in that and feel more comfortable with property, must be a psychological thing. Maybe when I have a bit more experience with shares I will be more confident in that market, but the leverage into property also has a big attraction.
So that is why I am looking at prorerty still, if I can get 10%CG and 5 % yield it adds up to not a bad return, considering the additional leverage over shares.

Hi Brizzy Boy,
I picked those burbs because the properties looked reasonable in realestate.com.au, the map looked like they were pretty well served with services/infrastrucure and my previous target area (carindale ++) had already had above average growth. So I am hoping to pick the area with some more growth left. It is pretty hard doing the research fromhere in Canberra so any advice/suggestions would be greatly appreciated.

I am also planning to use a buyers agent before I buy the IP.

:D
cheers
lucky
 
Hi Lucky,
I am only new to this game but I am concentrating on the outer fringes of Brisbane, where I feel there is still room for growth. My current IP's fetch me 6.5 to 7.5% gross. Cg has been over 33% now that % is from my first bank valuation to my last, as I am currently building another IP. So there has only been less than 9 months between both bank valuations.

Where I am currently building is showing a 33%Cg on median price in the current API, I was only banking on 7%Cg so things are looking better as time goes on. "All I have to remember is not to get ahead of myself as I may take a tumble"

All the best
John ;)
 
Lucky,

All I can say is that you are close just look a little further and they are their, but remember I am new to this game and I do not want someone to make a descision on what I have said. I do a lot of research, "as I am that way inclined". I have a few friends that are investers and have gone against their advise. As I have said " I hope that I do not take a tumble" But my gut feeling is that I am here to enjoy the ride!!

John :D
 
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