“When you are looking to purchase an investment property, one of the most important figures to calculate is the rental yield – also known as the net return on the money invested…”
Whether you are buying your first investment property or a seasoned investor buying a waterfront property with the help of a buyer’s agent in Sydney, you should always calculate the rental yield or investment property yield on a potential investment property. This comparative figure will form the basis for making a decision to proceed on that property or other available properties.
If the return is too low, then alternative investment properties should be investigated and reviewed, however on the other side of the coin, if the relative investment property yield is very high, then there may be other accompanying risk factors that should be investigated and considered before making the decision to invest.
It is often the case that areas with a lower yield have a higher capital gain and vice versa so it is worthwhile to look into historical data to see what trends have emerged for that location and type of property over time. So how do you calculate the rental yield on a potential property investment?
To calculate the yield you start with the purchase price as the denominator. The net yearly income is the numerator. Take care when figuring out the net yearly income. To calculate this, take your gross yearly rental income and subtract all outgoings such as:
- management fees
- council rates
- water charges
- repairs and general maintenance costs
- strata levies
- taxes and
- any other costs of holding the property
Once you have narrowed the potential investment properties down to a short list, it is a good idea to also compare the depreciation on the properties and add this into the equation to find out your exact return.
For the Sydney investor, it is ideal to look for a property that sits around the median price for a suburb. The rental yield generally decreases as the property price increases as the rental income doesn’t always rise commensurably with the house price. In this case it is a good idea to investigate the vacancy rates on the property before making a decision to purchase, vacancy rates of 3% or greater should be a warning sign.
If you would like help buying an investment property with a high investment property yield in the Sydney North Shore, Northern Beaches, East or Inner West region, contact Amanda who is a buyer’s agent in Sydney. She will be able to assist you with your investment whether you’re looking for your first investment, waterfront property or a prestige property to add to your portfolio.
Amanda On My side offers exceptional buyers agent services throughout Sydney and across Australia. Engage a professional real estate buyers agent to help you find the best property at the right price. A property buyers agent, also known as property finders or a buyers advocate, can help find, research and bid on your next home or investment property. Need a buyers Agent Sydney – then you need Amanda on your side.
Tags: buyers agent, calculate rental yield, investment property, investment property yield, property buyers agent, property buyers agent sydney, real estate buyers agent
