There used to be a rough rule of thumb which said the gross yield was 5% for houses and 7% for units. That was when rates were higher than they are now. Of course this was flexible depending on the suburb and location.
So now that standard variable rates are under 5%, do you think a 5.5% gross yield on a unit in a good location is acceptable or too low? I'm looking at one with a 5.5% gross yield but only 3.3% net yield. The location is good so I'm banking on future cap growth.
My definitions:
Purchase price = Contract price. Doesn't include stamp duty or conveyancing fees.
Gross yield = Annual rent divided by the purchase price, expressed as a %.
Net yield = Annual rent minus body corp, agent management fees, council and water rates; divided by the purchase price, expressed as a %.
So now that standard variable rates are under 5%, do you think a 5.5% gross yield on a unit in a good location is acceptable or too low? I'm looking at one with a 5.5% gross yield but only 3.3% net yield. The location is good so I'm banking on future cap growth.
My definitions:
Purchase price = Contract price. Doesn't include stamp duty or conveyancing fees.
Gross yield = Annual rent divided by the purchase price, expressed as a %.
Net yield = Annual rent minus body corp, agent management fees, council and water rates; divided by the purchase price, expressed as a %.