Calculation for the annual rental yield?

Viewing 8 posts - 1 through 8 (of 8 total)

Adaml
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@adaml
Join Date: 2003
Post Count: 6
October 25, 2003 - 11:22 am
Can anyone clear something up for me. Is the annual rental yield the gross yearly rental income divided by the loan amount or by the pruchase price…. or do I just have no idea?
wilandel
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@wilandel
Join Date: 2003
Post Count: 761
October 25, 2003 - 12:41 pm
Hi Porsche,
Annual rent divided by purchase price = gross yield.
eg.. $150pw x 52 = $7800
$7800 div by $70000 purchase price = 11.14% gross return.
Regards,
Del []
Still in School
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@still-in-school
Join Date: 2003
Post Count: 1,844
October 26, 2003 - 3:10 am
To get the Profit yield against the loan and not to take in cash on cash as consideration is worked out like this.
$70,000.00 purchase price – weekly loan repayment $104.92 (based on 6% over 30 years)
Rental = $150
Passive income = $45.08
Profit yield against the loan = $45.08 divide by $150 = 30%
p0sitiveCasHfl0w
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@p0sitivecashfl0w
Join Date: 2003
Post Count: 133
October 26, 2003 - 3:31 am
Still in School… why are you dividing the weekly profit by the weekly rent?? Your equation should look like this:
Profit yield against the loan = $45.08 divide by $104.92 * 100 = 42.9%
Cheers,
Jay
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Still in School
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@still-in-school
Join Date: 2003
Post Count: 1,844
October 26, 2003 - 3:37 am
oh sorry about that, not thinking and puttin in the wrong caculations.
thanks positive cashflow
Still in School
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@still-in-school
Join Date: 2003
Post Count: 1,844
October 26, 2003 - 4:00 am
refer to my mistake as passive profit as “passive profit as a percent”
muppet
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@muppet
Join Date: 2003
Post Count: 900
October 26, 2003 - 9:14 am
Hi Guys
Don’t forget your weekly share of expenses eg rates, insurance, water rates etc. That will increase your weekly outgoings and therefore lower the %.
I think it is better to look at net yield rather than gross yield if you want money in your pocket.
The tax refund then is the cream on the cake.
Regards
Adaml
Participant
@adaml
Join Date: 2003
Post Count: 6
October 26, 2003 - 9:35 am
Hi muppet,
It’s a good point you make about net verses gross. I read an article the other day stating that most investment properties return an annual rental yield of around 2-3%. I am guessing this is due to them being negatively or neutrally geared??? However, this article also stated that to be able to continue to leaverage, Financial Institutions like to see an annual rental yield of >8%. It is for this reason I would like to make sure my calculations (formula) are correct on this. If there are any Morgage Brokers out there that could clear up, or shed some light on the yield issue, it would be greatly appreciated.
Thanks.