What is rental yield?

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IsanRealEstate
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What is rental yield?

Post by IsanRealEstate » November 17, 2016, 10:14 am

If you’ve been considering property investment, chances are you’ve come across the term “rental yield”. As an investor, it is an important concept to understand, to assess the potential income and cash flow of an investment property.

Rental yield is the rate of income return over the cost associated with an investment property, typically expressed as a percentage. It’s a frequently used matrix in property data, and it’s important to understand how it is calculated and what it indicates.

To learn more about Rental Yield, please click on the following link to download our article.
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Alchai
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Re: What is rental yield?

Post by Alchai » November 17, 2016, 7:36 pm

Hi
So what percentage would be considered as a "healthy" rental yield? :-k
We may have all come on different ships, but we're in the same boat now

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IsanRealEstate
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Re: What is rental yield?

Post by IsanRealEstate » November 17, 2016, 8:44 pm

Good question Alchai,
As the download suggested, there are may variables to consider and which type of yield is best for your personal situation.
In our experience, yield is often compared against the current financial institution interest rates.
Example: If current rates are returning .75 - 1.2%, then anything greater than that could be classed as good. Why go through the rental process and risks involved when you could sit back, do nothing and have your return already determined by the institutions, especially if the same amount of investment was applied to each scenario. However, land values and costs fluctuate, hopefully in a forward momentum and equally which when reasonably applied, would make your asset value higher. Again, if that was the case, if your premises was tenanted, annual expenses outweighed land price growth, then without increasing rental prices, your yield would decrease. That in itself would depend on whether the tenants wish to pay higher rent. If not, then your opportunity to find tenants willing to pay extra, theoretically decreases your number of genuine tenants seeking properties to rent.
On the flip-side, consider the period of 2008 to present. GFC, housing market severely depressed, global financial disaster for millions, if not billions of people and uncertainty as to where to invest, if at all. For the unfortunate people who suffered through this period, many also prospered due to the demand for rental properties after mortgage foreclosures. In that situation, if you were financially secure your yield would have been quite possibly in the range of 8 - 10% depending on the country itself.
Can we suggest that you, as the owner, should determine what is the percentage yield you wish your properties to return?
If we were to make an assumption now, around Udon only, A yield of 3 -5% would be benchmark. Thanks for the question.

To all members, this is an open forum and you are very welcome to make comment, in fact we encourage it, as this forum was established for that exact purpose, to better understand the local and regional Real Estate market with input from those who have invested within the region, either directly or indirectly through wives or business's.
IsanRealEstate
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