Navigating Rental Demand and Yield
When considering an investment property, it is crucial to thoroughly research and assess areas with strong demand.
When looking to buy an investment property, demand is a crucial factor to consider. High demand indicates that there are plenty of potential renters seeking in the area, which can reduce the days your property is vacant.
What is rental yield?
Rental yield is the return on investment, measured by the gap between your property cost and the rental income you receive from leasing the property.
To calculate the yield for an investment property, lets use the following example. An investment property valued at $500,000 with an expected rental income of $500 per week would have the gross rental yield calculated as follows:
($500 x 52) / $500,000 = 0.052 x 100 = 5.2%
When it comes to net rental yield, the calculation becomes more comprehensive as it takes into account all costs and fees associated with the property, such as council rates, strata levies/body corporate fees, property management fees, depreciation, and insurance.
Continuing with the same example, if the total annual costs to maintain the property amount to $4,920, the net rental yield would be calculated as follows:
($500 x 52) – $4,920 / $500,000 = 0.042 x 100 = 4.2%
When you’re exploring properties with Armstrong Real Estate for sale, our sales agents will always have a rental appraisal letter prepared by our property management team. This provides you with valuable insight and helps identify properties that could offer a higher return on investment.
If you need additional guidance, our rental team is always ready to assist. Click here to book an appointment.
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Armstrong Real Estate has made every attempt to ensure the accuracy of information presented in this article. However, its content is general in nature and does not take into consideration your personal situation and may not be relevant to your circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. It is not intended to constitute tax or financial advice, whether general or personal, nor is it intended to imply any recommendation or opinion about a financial product. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.
