HOW RENTAL YEILD WORKS
Have you heard people talking about rental yield but don't actually know what it means? Let me explain it for you in basic terms.
Rental yield is rental income as a percentage of the property’s value. The rental yield will change depending on which state you own property in.
For example, if you buy a property for $600,000 in Brisbane and it’s currently rented for $500 a week, to work out the rental yield, you would divide your total annual rental income ($26,000) by the value of the property. In this case, your rental yield would be 4.3%.
Example: Property value $600,000 and rent $500 a week.
$26,000 ($500 x 52 weeks) (annual rental income)
/ (divide) $600,000 (property value)
x (times) 100
Rental yield = 4.33%
If you buy a property in Hobart for $120,000 and rent it out for $180 per week, your rental yield would be:
$9,360 ($180 x 52 weeks) (annual rental income)
/ (divide) $120,000 (property value)
x (times) 100
Rental yield = 7.8%
So straight away you can see the difference in rental yield between a property in Queensland and a property in Tasmania.
The more you can close the gap between what your property is worth (through renovating it or capital growth, etc) and the rent it brings in, the higher the rental yield will be.
If you need any help with leasing your property, please get in contact with me.
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