Hi All,
I am currently doing my numbers in relation to a potential development and wanted to get an idea of what you would classify a low, medium or high yield.
The property is in the inner city of Melbourne and the yield would be very close to 2.5-3% gross. After building another town house the total yield would be around 4.5% gross.
If anyone can shed some light around this it would be much appreciated.
Cheers,
Mav4.5% yield seems very low post development. It really depends on what you are aiming for- capital growth or rental yields, and is impossible to comment without knowing where the property is located.
Cheers,
LukeHi Luke,
The property is in inner city Melbourne approx 8-10 kms from the cbd. The main goal is for capital appreciation however a re development will increase the yield and my affordability to service the loan.
It seems as though on average in the inner city suburbs rental yields are around 3% for a house. What would be classified a high yield?
I know this question might be hard but I am just looking for peoples opinion on what yield they try to target post a development.
Profit (margin) and yield are different things. The development should firstly make a profit, and then you should determine if the yield makes it a sound ongoing investment or if you should invest in something else.
to be honest… just wait 7-10 years for the property to double in value and keep renting it out until then
Well those are my thoughts anyway. Buy and hold (then leverage)Cheers
Jason
Jason700 wrote:to be honest… just wait 7-10 years for the property to double in value and keep renting it out until then Well those are my thoughts anyway. Buy and hold (then leverage)Cheers Jason
IF you can afford it. 2.5-3% is WAY too low for me to hold on and hope for CG.
That's one hell of a loss EVERY year. You would want to get som,e serious CG to compensate for that. With ibnterest rates of 7% you're losing 4% + rates + insurance + agent fees + + + (EVERY year)
Mav86,
The benchmark is the term deposit. If you can achieve 6.5% earnings on term deposit, then the return from IP should be higher. If not, what is the point? Park the money in TD, and sip margarita (or guzzle coffee in my case). For a lot of work, you should aim to be generously rewarded.
Take care.
Angel
This answer would seem to fit under a heading of 'feasibility study' for a development.
One positive is the yield numbers mentioned will be worked out on the final valuation? So presumably if you are creating equity with a build then your yield on total spend will be higher.
Basic stuff but it likely can't be said too many times, invert, work backwards, begin with the end in mind etc. What is your goal, next few steps to move you closer and would this deal help with that?
Catalyst wrote:Jason700 wrote:to be honest… just wait 7-10 years for the property to double in value and keep renting it out until then Well those are my thoughts anyway. Buy and hold (then leverage)Cheers Jason
IF you can afford it. 2.5-3% is WAY too low for me to hold on and hope for CG.
That's one hell of a loss EVERY year. You would want to get som,e serious CG to compensate for that. With ibnterest rates of 7% you're losing 4% + rates + insurance + agent fees + + + (EVERY year)
It all depends on how much you're borrowing but yes I agree when you put it like that… It'll hurt
In that case, 6.5% – 8.5% gross yield for Sydney suburban townhouses should be good then…?
The rent paying paying most of the interest off.
Well those are my thoughts anyway. Buy and hold (then leverage
)
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