If bank CEOs and RBA governors had half a clue, they wouldn't be doing their jobs, but would've caught the last boom.
What are your strategies for high yield IP's???
- Thread starter Mindmaster
- Start date
Can someone please help me work out yields? Maybe you can use my example.
- My current IP purchased beginning of last year for $445,000K, SD about $16K. (lived in the house first for 11 months before renting out).
- On going costs - mortgage approx $1,900p.m IO, rates are $2K p.a, insurance about $800 p.a.
- I get $480 p.w. rent, no management fees as I manage it myself.
Not sure how to calc tax deductions. I'm on The 2nd last bracket - 37c in the dollar.
What would the yield be and could you please show me the cals so I know how to work it out next time?
- My current IP purchased beginning of last year for $445,000K, SD about $16K. (lived in the house first for 11 months before renting out).
- On going costs - mortgage approx $1,900p.m IO, rates are $2K p.a, insurance about $800 p.a.
- I get $480 p.w. rent, no management fees as I manage it myself.
Not sure how to calc tax deductions. I'm on The 2nd last bracket - 37c in the dollar.
What would the yield be and could you please show me the cals so I know how to work it out next time?
This is my way of way of calculating yield.
Method 1:
Gross Rental yield = (Rent * 52) / purchase price
It is 5% yield if purchase price is 400K and the rent is $400 pw.
Method 2: Kind of out of pocket yield.
Net yield = (Rent * 40 weeks - Actual loan * Interest rate + Depreciation) /Actual loan
I include only 40 weeks to count for other expenses and vacancy.
Method 3: Actual Yield
Net yield = (Actual Rental income - All costs)/Actual loan
Method 4: Yield if you are using LOC for deposit + costs to see if a deal is worth it.
Mortgage = Purchase Price * 105%
Net yield = (Rent * 40 weeks - Mortgage * Interest rate) /Mortgage
I use Method 4... but may be that is the reason I'm struggling to buy anything
Method 1:
Gross Rental yield = (Rent * 52) / purchase price
It is 5% yield if purchase price is 400K and the rent is $400 pw.
Method 2: Kind of out of pocket yield.
Net yield = (Rent * 40 weeks - Actual loan * Interest rate + Depreciation) /Actual loan
I include only 40 weeks to count for other expenses and vacancy.
Method 3: Actual Yield
Net yield = (Actual Rental income - All costs)/Actual loan
Method 4: Yield if you are using LOC for deposit + costs to see if a deal is worth it.
Mortgage = Purchase Price * 105%
Net yield = (Rent * 40 weeks - Mortgage * Interest rate) /Mortgage
I use Method 4... but may be that is the reason I'm struggling to buy anything
Devank thanks for these
However, not being good at math -
$210 x 40 = $8400
less/minus
155000 x 5.6% = ? + depreciation?? - that is where I get lost.
Depreciation benefits are roughly 35% of (total income - Expenses + deduction from depreciation schedule).
To be exact you can use either 37% if you are earning over 80K or 32.5% if you are earning 37 -80 K.
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I suspect they have more than half a clue, do their jobs very well and caught every dollar from the last "boom"... and every dollar since
They have about half a clue at most. But one thing you say is true. They do their jobs very well, that's why they're a CEO on a salary.
Re yield, the only true measures are:
Net Income / Total Cost of Property
or
Net Income - Interest / Total Cash Spent
Net income include everything from land tax, insurance, repairs, council rates etc. Total cost of property includes renovations, stamp duty, lawyers' fees etc.
