Forums / Property Investing / General Property / How much yield do you want?

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  • Profile photo of The DIY Dog WashThe DIY Dog Wash
    Member
    @the-diy-dog-wash
    Join Date: 2003
    Post Count: 696

    Hi Folks

    How much rental yield do you look for when buying a property these days.

    CHeers
    Leigh K

    http://www.ldesignegallery.com

    Profile photo of wilandelwilandel
    Member
    @wilandel
    Join Date: 2003
    Post Count: 761

    Hello Leigh my good buddy,

    Yield – maybe 8.5% and over if it has the chance of reasonable capital gains.

    The place has not been the same without you!!!

    Talk soon,

    Del

    http://www.nzpropertytogo.com

    Profile photo of DazzlingDazzling
    Member
    @dazzling
    Join Date: 2005
    Post Count: 1,150

    Depends on the level of land content vs list price.

    If the land is more than 85% of the list price – at least 7% nett.

    If the land content is less than 85% of the list price – at least 10% nett.

    Cheers,

    Dazzling

    “No point having a cake if you can’t eat it.”

    Profile photo of wayneLwayneL
    Member
    @waynel
    Join Date: 2003
    Post Count: 585

    Well that counts out about 99.9999% of property in Oz!

    (I know its not as bad as that, but please indulge my use of hyberbole. It actually only counts out about 99.9996% of property in Oz)

    :)

    Profile photo of DazzlingDazzling
    Member
    @dazzling
    Join Date: 2005
    Post Count: 1,150

    Wayne,

    Have absolutely no idea if your figures are correct or not…they very well could be.

    However, I know from doing a moderate amount of research, finding those ~ 0.0004% of properties that do qualify for our criteria takes about 30 to 50 hours of surfing the net and talking to agents / vendors.

    Last week I posted half of our research list that was the ‘second pickings’ after our purchase went ahead.

    The trick is to ignore the 99.99% of deals that instantly won’t cut the mustard and then narrow in from there.

    Just checking this morning, there are still 8 properties on our previous full list still for sale today that are all over 10% nett yield. Land content ranges from about 34% up to about 59%, not high enough for us, but suffice to say they are all out there. [blush2]

    Cheers,

    Dazzling

    “No point having a cake if you can’t eat it.”

    Profile photo of kay henrykay henry
    Member
    @kay-henry
    Join Date: 2003
    Post Count: 2,737

    Heya Leigh- long time, no see :)

    I’d be looking for a 10% property now. My current properties have yields ranging from 6%-9% rental yield (gross but not including depreciation which would raise their yields by a few percentage marks) and have had significant capital growth since purchase, but I figure now, with capital growth pretty much at a standstill for many properties in the next few years, i’ll be seeking yields in the double figures… and then, in the years after that, if growth remains semi-dormant, I’ll be happy to reduce my expectations on yield again- for the promise of growth.

    I have identified properties that do have >10% yield, by the way. They are out there still.

    Welcome back, Leigh!

    Del, how are your CD sales going? Looks interesting :)

    kay henry

    Profile photo of The DIY Dog WashThe DIY Dog Wash
    Member
    @the-diy-dog-wash
    Join Date: 2003
    Post Count: 696

    Hi Del Hi KAye

    Good to be back!

    Dazzling

    Could you please explain to me what you mean by the land content being 85% of list price. I it is a dumb Q to you but I don’t know what you mean.

    Cheers
    Leigh K

    http://www.ldesignegallery.com

    Profile photo of DazzlingDazzling
    Member
    @dazzling
    Join Date: 2005
    Post Count: 1,150

    No problem Leigh,

    In my opinion the property has 3 aspects to it’s value.

    Land value
    Buildings erected thereon
    Existing tenant

    Let’s say the prop is listed for sale with an asking price of $ 1 MM.

    Bare block of land is worth 850K (85% of list price)
    Buildings are worth 70K
    Lessee on a 5 yr lease paying 70K p.a.

    This would be a prop that would qualify just and we’d be interested in looking at it.

    Or, something like;

    Bare block of land is worth 600K (60% of list price)
    Buildings are worth 200K
    Lessee on a 5 yr lease paying 110K p.a.

    This would also be a prop that would qualify our criteria and we’d be interested in looking at it.

    Make sense ??

    Cheers,

    Dazzling

    “No point having a cake if you can’t eat it.”

    Profile photo of romoromo
    Member
    @romo
    Join Date: 2005
    Post Count: 7

    What market are you in? Rising, flat or falling? You will always be seeking more than the average of the market.

    Profile photo of The DIY Dog WashThe DIY Dog Wash
    Member
    @the-diy-dog-wash
    Join Date: 2003
    Post Count: 696

    Dazzling

    I get the % of list price now but I don’t see how you use it as your criteria, if your not giving to much away could “please explain”

    Cheers
    Leigh K

    http://www.ldesignegallery.com

    Profile photo of supermansuperman
    Member
    @superman
    Join Date: 2003
    Post Count: 53

    Land appreciates
    Infrastructure depreciates

    So if you have a higher % of depreciating assets, a higher yield is needed to offset.

    Profile photo of Robbie BRobbie B
    Member
    @robbie-b
    Join Date: 2004
    Post Count: 2,493

    Hey there superman,

    Here is another investment for you that you might be interested in as it involves depreciating assets.

    I find that the yield on depreciating assets is much higher when considering the impact of taxation.

    How would you criticise a person who told you that you could get a guaranteed 20% GROSS return on your investment while also being able to depreciate 100% of the assets purchased over 3 or 5 years and then sell those assets for 50% of the original purchase price at the end of 5 years?

    I was put onto this investment by someone in this forum but did not criticise them or tell them it was impossible. I went and checked it out and found it to be real.

    You might argue that a guarantee is only as good as the entity providing it. In this case, the entity has been in operation for over ten years and has strong management and succession planning in place to secure all investments.

    I guess things are done differently in the USA. That is where you are from isn’t it?

    Robert Bou-Hamdan
    Mortgage Adviser

    http://www.mortgagepackaging.com.au

    Investor Links

    Profile photo of supermansuperman
    Member
    @superman
    Join Date: 2003
    Post Count: 53

    Yeh yeh, I’ve got a sharp tongue, my bad, again, my wife keeps me in check [biggrin]. Now as for this investment, if you’re in the top tax bracket (let me run with 50% this time would ya [wink]) then the depreciation tax benefit equals the true capital loss. So the return becomes purely the gross 20%.

    Now since this is gross, this value means nothing to me until I understand the costs to subtract to get the net. Unless, as with the other investment form, the only cost is tax. Either way the 24% remains superior.

    One thing I’m still trying to determine is whether or not it is possible to geae into either of these investments?

    Profile photo of Robbie BRobbie B
    Member
    @robbie-b
    Join Date: 2004
    Post Count: 2,493

    Yes you can gear.

    Robert Bou-Hamdan
    Mortgage Adviser

    http://www.mortgagepackaging.com.au

    Investor Links

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