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  • Profile photo of JpcashflowJpcashflow
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    @jpcashflow
    Join Date: 2007
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    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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    Profile photo of CatalystCatalyst
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    @catalyst
    Join Date: 2008
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    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. 

    Profile photo of Jamie MooreJamie Moore
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    @jamie-m
    Join Date: 2010
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    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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    Profile photo of BennyBenny
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    @benny
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    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

    Profile photo of TerrywTerryw
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    @terryw
    Join Date: 2001
    Post Count: 16,173

    I just use price divided by annual rent.

    Terryw | Structuring Lawyers / Loan Structuring Pty Ltd
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    Profile photo of streamlineinvestingstreamlineinvesting
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    @streamlineinvesting
    Join Date: 2010
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    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.

    Profile photo of daniel vicdaniel vic
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    @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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