What's your yield in Melbourne?

[srini]

Following on from the excellent article posted on a thread here http://www.somersoft.com/forums/showthread.php?p=781970#post781970, I thought it would be interesting to see what the rental yield is for your IP/portfolio in Melbourne.

Care to post it here?

Mine is:

As of 2009/10 FY:
IP #1 (bought in 2004): 6.2%
IP #2 (bought in 2008): 5%
IP #3 (bought in 2009): 5.2%

 

[ashalim]

Hi Srini,

Are those figures based on current valuation or the original value of IP?

 

[Melbournian]

IPs - bought in 2010 - yield is 8.5%

 

[tobe]

current rent, current vals, two one bedroom flats, inner east suburbs, 3.9%...

First bought 6 years ago, repainted and carpet once, no reno's or maintanence since.

Second bought at the top of the GFC, 2009 outside of the block rendered and spruced up, no itnernal reno's apart from paint.

 

[Tom-B]

Hi tobe

is that an Advantage Property block?

 

[Intrinsic_Value]

to make a proper assesment i think one needs to compare current prices against current ylds. Not against purchase price.

The opportunity cost of capital (equity) should then be measured against current yld + anticipated capital growth.

 

[srini]

My numbers are based on purchase price.

All in the SE suburbs.

 

[BayView]

We only have on IP in Melb - our unit in Frangers.

Bought for $155k in '04, rents currently for $210 per week = 7.04% yield.

 

[Sunfish]

We only have on IP in Melb - our unit in Frangers.

Bought for $155k in '04, rents currently for $210 per week = 7.04% yield.

That's gross yield. You bank the nett. How much would that be?

 

[cmason]

I also think if comparing properties bought at different times need to compare yield based on current value of property:

2 bdr townhouse Noble Park bought in 2001
Purchase price: $100K
Current Value: $290K
Market rent: $250p/w
Actual rent: $220p/w(based on good tenant been there for 6 yrs)

Gross yield, current value/market rent: 4.48%
Gross yield, current value/actual rent: 3.94%
Gross yield, purchase price/market rent: 13%
Gross yield, purchase price/actual rent: 11.44%

 

[BayView]

That's gross yield. You bank the nett. How much would that be?

I always expect about 20% of the rent to be eaten up by expenses.

This is not including the loan interest either of course.

But I think we're all talking gross yield?

Was Melbournian talking gross?

 

[KoopaTroopa]

This might sound like a silly-ish question, but why should we use "current values" to calculate the yield?

Doesn't that almost always guarantee a lower "percentage" value?

Isn't it better to calculate it on the balance owing?

e.g. A property bought at $260,000 and rents for $315 a week would have a better "yield" if the balance owing on that property was now $250,000. But if it's valued at $360,000 now then the yield is "worse".

So can someone explain why we should be using "current values"?

 

[zed_kid]

This might sound like a silly-ish question, but why should we use "current values" to calculate the yield?

Doesn't that almost always guarantee a lower "percentage" value?

Isn't it better to calculate it on the balance owing?

e.g. A property bought at $260,000 and rents for $315 a week would have a better "yield" if the balance owing on that property was now $250,000. But if it's valued at $360,000 now then the yield is "worse".

So can someone explain why we should be using "current values"?

Because that’s how you analyse if the investment is good or not. So on current yields to current market prices Melbourne is shithouse for lack of a better word. You can’t really buy a property now at 2001 prices so don’t calculate yield on that price. But for your own portfolio yield calculating on purchase price is fine as it represent how much yield YOU are getting.

 

[Sunfish]

Let's use this property as an example:

2 bdr townhouse Noble Park bought in 2001
Purchase price: $100K
Current Value: $290K
Market rent: $250p/w
Actual rent: $220p/w

Using current rent and purchase price this is a profitable, CF +ve hold.

But if C Mason saw another investment he/she though was attractive it would not be helpful to compare those historic returns to those expected in the new venture. Instead he/she should compare the return on the market price of the property to what the new venture can return on that same capital.

Historic buying price is interesting at tax time but market value should be used for the purpose of comparison.

 

[sash]

Yield of my places based on purchase price:

1. 2006 3 brm house Hoppers Crossing - purchased for 170k rented for $280pw- gross yield is 8.6%

2. 2006 3 brm house Werribee - purchased for 130k rented for $245pw - gross yield is 9.8%

3. 2007 3 brm house in Melton South - purchased for $155k rented for $230pw - yield is 7.6%

All are postively geared once depreciation is factored in. The first two are positively geared even before depreciation. This is because my rates are still in the high 5s or high 6s.

 

[wobbycarly]

Only 1 in Melbourne (outer Eastern suburbs).

3+2 w/ carport; standalone house; ~500m[sup]2[/sup].

Purchase $120k, loan $50k, current val $300k, current rent $250 pw.

Yield on purchase price ~11% - Pretty good
Yield on loan ~ 25% - Woo hoo!!
Yield on current value ~ 4.3% - Crap!

 

[BayView]

This might sound like a silly-ish question, but why should we use "current values" to calculate the yield?

Doesn't that almost always guarantee a lower "percentage" value?

Isn't it better to calculate it on the balance owing?

e.g. A property bought at $260,000 and rents for $315 a week would have a better "yield" if the balance owing on that property was now $250,000. But if it's valued at $360,000 now then the yield is "worse".

So can someone explain why we should be using "current values"?

I only want to know about what the return is on the money I have put in.

Otherwise, you are looking at the return that someone would be getting if they bought that same investment right now, and in many cases that would be an abysmal rental return. So, to you, right now, maybe you can't see a good reason to buy something, while right now I can see a few good reasons not sell anything with my returns.

If I looked at the return I currently get based on the property's current value, and followed your theory; I'd have a lot of dud investments and be looking to sell them immediately. But, I have properties that are returning 14% on the purchase price, and considering the actual cash I put into those deals (none - used equity) the return is infinity.

Each time you make an investment, the funds used on that investment will have it's own set of numbers. What the return is on that investment that someone might pay for it in 10 years time is irrelevant.

 

[Melbournian]

Was Melbournian talking gross?

i was talking gross as well but i self manage and use an agent on 1. these are just my ips for 2010 as the others are in trust from previous years. All interest only. All positive

450K, Rent $750
490K Rent $770
488K rent $850

Average yield = 0.86%

 

[KidsInheritance]

i was talking gross as well but i self manage and use an agent on 1. these are just my ips for 2010 as the others are in trust from previous years. All interest only. All positive

450K, Rent $750
490K Rent $770
488K rent $850

Average yield = 0.86%

Fully Furnished?
Serviced?

 

[Melbournian]

Fully Furnished?
Serviced?

nope not full serviced

only 2 is semi furnished.