What is an acceptable gross/net yield now that rates are so low?

Yield doesn't tell the full story anyway. 7% on a 200k property isn't the same as 7% on a 500k property after you take out expenses.

Agree, plenty of blocks of units providing 10%+ in regional areas for sub $500k prices but even minor maintenance repairs can eat into that quick smart.

Still would like to see an example of a 7%+ non regional house?

Do you pay for building/contents (carpets/fixed appliances etc.) insurance with units like that Dex or is that built in to the body corp?
 
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 %.

Your outgoings are running at 2.2%? presumably a shocking body corp?
 
Hey Dex,

a few have posted that they have achieved those yields in non regional areas in several threads and I thought it would be a good example for myself and others if they could post a link to one they can find on RE.com, just to show it can be done, even better if it's in an area one would expect to achieve reasonable capital growth also.

Why don't you factor in insurance when working out net yield? I was of the understanding that you include all outgoings when working out net?

Are you only looking at list price? Spludgey outlined some areas as has Michael X, vendors in those locations may also be negotiable on price depending on reasons for selling and a 5-10% discount from listed price makes a hugh difference. The absolute steals are often under contract ASAP but there are still opportunities, often one or two rent increases and you there.
With regards to CG no one knows there are only educated guesses but sometimes the rising tide lifts a whole city/region IMO
 
Agree, plenty of blocks of units providing 10%+ in regional areas for sub $500k prices but even minor maintenance repairs can eat into that quick smart.

Still would like to see an example of a 7%+ non regional house?

Do you pay for building/contents (carpets/fixed appliances etc.) insurance with units like that Dex or is that built in to the body corp?

I picked up a house in Beenleigh last week. $310k renting for $420 per week so exactly 7% gross, lease in place for 12 months.

Is Beenleigh considered non-regional?
 
Hi Michael, I'd definitely consider Beenliegh to be non regional, that's a great buy and just the sort of example I was after., thanks.

I'm not trying to test anyone here, I just wanted to see some examples of what more experienced investors are finding out there without taking into account future rental increases/renos/developments etc, just plain old CF+ straight off the bat in metro areas.
 
Agree with Deltaberry the best properties have super low yields but this is the trade off for A grade location with virtually nil vacancies.

Yes. I was very fortunate 2 years ago to pick up a very AAA-grade commercial building on a corner block.

At the time, the "net yield" was 3.9%. But after the tenant vacated in 1 day (the tenant was also the vendor), I increased the rent and I had around 6 offers of people wanting to rent it for 5.5% net yield in 2 weeks.

Fast forward today, the property now yields 6.2% net (ie after repairs, insurance, council rates, land tax etc). And today, a shop around a block away on a smaller land, not on a corner block and in a worser location collecting less rent than my one, just sold 60% more than what I paid for mine. I'm assuming this would be up 75% on a bad day, 100%+ on a good day.

Point is, I'm sure the 3.9% net yield (comparable to maybe a 5.5-6% residential gross yield) would've put certain types of investors off. A combination of market knowledge, foresight and luck would've changed their decision otherwise. It's not the most stagerring capital growth or yield, but that needs to be borne in mind that this is the type of property where after I bought it I've never been in, never had a phone call from anyone about it and never think about it.
 
I used to look for high 7s to 8% plus for a certain area I was looking at, now if I was buying, id look at 7% , so yeah my expectations have gone down!
 
For what purpose?
I'd rather make money, personally.

I would rather make money, capital growth and have less tenants to deal with.

Although the gross yield is higher your coming off a lower buy price. Outgoings on both would be comparable but as a percentage of your gross rent hurts you more.
 
I would rather make money, capital growth and have less tenants to deal with.

Although the gross yield is higher your coming off a lower buy price. Outgoings on both would be comparable but as a percentage of your gross rent hurts you more.

I'll take the money, the capital growth and the tenants as well.

You see, you can get the higher yield along with the capital growth, but yes, you are right, multiple tenants, which is what the PM's are for.

Outgoings are not comparable, depending on what Council you are dealing with & the amount they want to take for Rates & Water.
 
Just out of curiosity where are you getting the rental figures for the examples above? I didn't see them in the descriptions.
 
I would rather make money, capital growth and have less tenants to deal with.

Although the gross yield is higher your coming off a lower buy price. Outgoings on both would be comparable but as a percentage of your gross rent hurts you more.

Yes please. Same requests here :)

And no, the outgoings are pretty cheap. $500 for combined building and landlord insurance, $1200 for rates. Interest pretty cheap at the moment.
 
You are very wrong!

There are plenty of metro properties where you can get 7% or better yields. You just have to keep your eyes open to find them. No, they won't always be available in the area you are targeting. It depends on the market conditions at the time. If you are smack bang in the middle of a boom, then the chances of finding a high yielding property is much, much lower.

High yielding properties don't have to be lower CG properties. The two don't always go hand in hand.

Yes, I've got regional properties, but I've also got quite a few metro ones as well which were all bought with a good strong yield.

Yeah, naa. You won't find an A grade property yielding 7%. Maybe they're non regional and considered 'metro' but I wouldn't say they're in good areas and are usually the ones which fall harder in a downturn. But good for you, I mean that.

Your outgoings are running at 2.2%? presumably a shocking body corp?

Body corp is $30pw but council rates are high because of the excellent location and high land value.

I picked up a house in Beenleigh last week. $310k renting for $420 per week so exactly 7% gross, lease in place for 12 months.

Is Beenleigh considered non-regional?

Not regional but it wouldn't be something I'd buy. Good for you though.

Not bad but realistically if you bought something at a 5.5% yield for say 400k it would be a lot better located and the net % yields would be similar.

Agree. I'd rather sacrifice and have a lower yield in a better location, with better prospects for growth, a lower vacancy rate, a better quality tenant and more potential to increase the rent in future.
 
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