All Topics / Help Needed! / How do you calcuate Yeild?

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• Jpcashflow
Participant
@jpcashflow
Join Date: 2007
Post Count: 575

Hi every one,

Just a general question, how does every one calculate yield?

Some people my base it on the rent vs purchase price & some calculate it by rent vs purchase price/set up cost /  holding cost.

Jpcashflow | JP Financial Group
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Your first port of call in finance :)

Catalyst
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@catalyst
Join Date: 2008
Post Count: 1,404

For general I base it on ALL purchase costs (eg purchase + stamp duty + buy costs) and rent.

But you need to compare apples with apples. For example a unit may have a higher yield than a house but have high strata fees.

Yield is just a number, which in isolation doesn't mean much.

I'm more interested in the whole picture. Money in/money out. How much will it cost me to hold or in the case of a CF+ property- how much will it put in my pocket.

Jamie Moore
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@jamie-m
Join Date: 2010
Post Count: 5,069
Catalyst wrote:
For general I base it on ALL purchase costs (eg purchase + stamp duty + buy costs) and rent.

+1 that's how I do it too.

Cheers

Jamie

Jamie Moore | Pass Go Home Loans Pty Ltd
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Mortgage Broker assisting clients Australia wide Email: [email protected]

Benny
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@benny
Join Date: 2002
Post Count: 1,416

Hi jpc,

Solid answers already – to add to them, I would say a "Rent vs purchase price" yield calculation (or Gross Yield) is useful when deciding whether or not a prospective purchase  deserves any more of your time.  e.g. your goal "might" be to only buy properties that produce a gross yield of 7% and above (you pick the number).

So gross yield does have its place – horses for courses….  But like the others said, the really meaningful yield is the Nett Yield (all incomes and expenses vs cost price)

Benny

Terryw
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@terryw
Join Date: 2001
Post Count: 16,213

I just use price divided by annual rent.

Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
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streamlineinvesting
Participant
@streamlineinvesting
Join Date: 2010
Post Count: 171

I agree with the earlier posts, you really need to take into consideration all the costs associated with maintaining a property to calculate numbers effectively, such as rates, strata, utilities etc to be able to calculate yield.

But as was said before, yield is just a number, it does not mean much and you can manipulate numbers very easily to make them say what you want. At the end of the day you want to see how many dollars are coming into your pocket or out of your pocket.

daniel vic
Participant
@daniel-vic
Join Date: 2013
Post Count: 120

hey mate i find it like this

lets say you had a property worth \$100,000 and give you \$16,000 rent

\$16,000 / \$100,000 x 100 = 16%

This is a gross yield (not a yet return)

hope this helps

daniel

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