Calculate Rental Yield
Calculate Rental Yield
Calculate Rental Yield

How To Calculate Rental Yield in 4 Easy Steps

Knowing how to calculate rental yield is essential when purchasing property. Calculating rental yield will help determine whether or not your prospective purchase is financially viable.

“If you don’t calculate rental yield, you could be at risk of making an investment that isn’t as lucrative as you initially thought” advises Calibre’s Business Development Manager, Paul Tooze… “This is why it’s important to not only calculate your gross rental yield but also your net rental yield. Net rental yield takes into account all of the expenses associated with the property. It will give you a realistic figure of the property’s financial forecast.”

Knowing how to calculate rental yield is pretty straight forward, providing you have the right formula. So, we need to get a good grasp on the difference between gross rental yield and your net rental yield.

To help Calculate Rental Yield and understand the differences between Gross & Net Rental Yields, here’s some definitions that should help you out :

  1. 1.What does Yield Mean?

    Yield is a way of measuring what the future income on a property could potentially be. It is typically calculated annually and represented as a percentage based on the property’s current market value.

  2. 2.What does Gross Rental Yield Mean?

    Gross Rental Yield is the income on a property before the expenses are deducted.

  3. 3.What does Net Rental Yield Mean?

    Net Rental Yield is the income on a property after the expenses are deducted.

 

Calculate Rental Yield

How to Calculate the Gross Rental Yield in 4 Easy Steps

  1. 1.Calculating the Gross Rental Yield is based on 2 key figures. These figures are the property’s annual rental income and the market value of the property.
  2. 2.To determine the property’s rental income for the year, Calculate the weekly rental return x 52 (weeks in the year)
  3. 3.To determine the property’s value, use the property’s current market value. (if you would like to arrange for a Market Valuation to be conducted on your property, click here).
  4. 4.Gross Rental Yield = (Annual Rental Income / Property Value) x 100

 

Net Rental Yield

To calculate your net rental yield, you’ll need to calculate all of the expenses associated with the property. In doing so, you’ll need to consider such expenses as :

Property Costs To Include When Calculating Expenses

  1. 1.Market Value
  2. 2.Legal Fees
  3. 3.Stamp Duty
  4. 4.Strata Reports
  5. 5.Loan Costs
  6. 6.Building and pest inspections
    Tally up all of these Property Costs to establish a Total Property Costs amount.

Ongoing Expenses to Include When Calculating Expenses

  1. 1.Repair and Maintenance
  2. 2.Strata Levies
  3. 3.Mortgage Interest Repayments
  4. 4.Insurance
  5. 5.Loss Of Rent
  6. 6.Property Management Fees
  7. 7.Depreciation
  8. 8.Council Rates
    Tally all of these expenses on an annual basis to establish a Annual Expenses amount.

Calculate Rental Yield

How to Calculate the Net Rental Yield in 4 Easy Steps

  1. 1.Calculating the Net Rental Yield is based on 3 key figures. These figures are the Annual Rental Income, the Total Property Costs and its Annual Expenses.
  2. 2.To determine the annual rental income, Calculate the weekly rental return x 52 (weeks in the year)
  3. 3.When Calculating the Total Property Costs, simply add up all of the costs associated with the property.
  4. 4.To determine the Ongoing Expenses, add up all of the expenses on an annual basis.
  5. 5.Net Rental Yield = [(Annual Rental Income – Annual Expenses) / Total Property Cost] x 100

 

By keeping your annual expenses to a minimum, you will get a better return on your investment. By monitoring your annual expenses, you’ll have a more favourable outcome when you calculate rental yield. For tips on how to keep your save money on your annual expenses see :

Tenant Target Market
Thanks to Paul Tooze for sharing his expert knowledge.
0451 731 800
paul.tooze@calibrerealestate.com.au

If you have a property in Brisbane that you would like to arrange a property appraisal on please feel free to contact the friendly team at Calibre Real Estate (07) 3367 3411. Otherwise, we hope this article has helped to explain how to calculate rental yield.

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