When buying or owning investment property, one of the important figures to look at is the net return on the money you’ve invested, also known as the net rental yield.
Many investors will take the return on their money into consideration when determining where they will invest.
Does one particular property show a better return than another? How does investing in property compare with bank interest returns?
When considering the returns on an investment property you also need to look at the long-term capital growth. The property may have a lower short-term return (income), however, provide a higher long-term return (capital growth), 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: $623,000
Weekly Rent: $700 X 50 weeks
(Allow for a vacancy factor)
Gross Total Rent: $35,000
Less Expenses: $ 10,000
(E.g. Maintenance, insurance, management fees, cleaning, interest costs, depreciation)
Net Rent: $25,000
$25,000 / $623,000 X 100
Net rental yield return = 4.01%
For a detailed more accurate return on your property that takes all expenses and depreciation into consideration, we recommend that you speak with your accountant or financial advisors. ■
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