Posted on August 10, 2017 at 6:17 am
When buying or owning an investment property, one of the important aspects is to know the net return on the money you have invested, which is also known as the net rental yield.
This is important for investors to take into consideration when determining the viability of an investment.
Does one particular property show a better return than another? How does investing in property compare with bank interest returns?
When considering the comparison of returns on an investment property you also need to look at the long-term capital growth that a property can provide.
The property may have a lower short-term return (rental income), however, provide a higher long-term return (capital growth – when the property is sold), which can often give you a far greater opportunity for making money.
HOW DO YOU CALCULATE YOUR RENTAL NET YIELD RETURN?
A simple example:
Purchase Price: $289,000
Weekly Rent: $350 X 50 weeks (Allow for a vacancy factor)
Gross Total Rent: $17,500
Less Expenses: $7,000 (E.g. Maintenance, insurance, management fees, rates, interest costs, depreciation)
Net Rent: $10,500
$10,500 / $289,000 X 100
Net rental yield return = 3.63%
For a detailed more accurate return on your investment property that takes all expenses and depreciation into consideration, we recommend that you speak with your Accountant and/or Financial Advisors.