Calculating rental yield
- Thread starter Aesop
- Start date
B
Bez
Guest
Annual Rental Income divide by Market Value
None of these links provide an answer. (the first one contains links that don't work)
Some suggest yield is annual rent/current value
Some say you include SD
Some say it's your yield as your outlay versus your incomings (if this is the case then do you only include the interest only portion of the mortgage repayment or all of it)
Some say you take tax relief into account some say you don't
Some say the devil is dead, me I'm just confused
Some suggest yield is annual rent/current value
Some say you include SD
Some say it's your yield as your outlay versus your incomings (if this is the case then do you only include the interest only portion of the mortgage repayment or all of it)
Some say you take tax relief into account some say you don't
Some say the devil is dead, me I'm just confused
B
Bez
Guest
It can be calculated whichever you want...it depends on which one you want to calculate.
Exactly. You really need to know what are the all the outgoings and the audited income and then you can draw your own conclusions. If the income isn't audited then it's just pie in the sky.
B
Bez
Guest
Yes, it would depend on what they factored in and out, it's all esttimates anyway.
Would return on invested capital not be a better way of looking at a rental property? Something like annual rent minus annual costs( interest, insurance, maintenance costs etc) divided by invested capital( whatever you put down when you bought the property including SD, fees etc) divided by 100.
This would show your return or potential return on any property which is surely the way a business would look at any potential investment oppertunities.
This would show your return or potential return on any property which is surely the way a business would look at any potential investment oppertunities.
AFAIK initial rental yield is calculated in a standard way as annual rental income as a percentage of the selling price. Occasionally, but less common in my experience, initial rental yield is calculated by expressing the annual rental income as a percentage of the selling price inclusive of acquisition costs, which would obviously lower initial yield.
Cityliving
Registered User
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- 125
I`m not sure how many variations you can have but the most valuable way to see how your own finances are as I see it is to use the total amount you paid for the property (SD etc) and divide your yearly rental income (less your costs insurance etc). If you dont remove your costs you could get a healthy figure but whats the point if your insurance and other costs eats away all your profit?
If you had a bond and it made 10% in a year you wouldnt say 10% yield you`d say 10%-DIRT wouldnt you?
If you had a bond and it made 10% in a year you wouldnt say 10% yield you`d say 10%-DIRT wouldnt you?
FintanPhelan
Registered User
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if you pay €300,000 for a house and it generates an annual rental of €12,000 then the 12k is 4% of the 300k, thats a 4 % rental yield, I would say to you the rental yield is worked out on the purchase price as if you based it on market value rental yield would only be a notional figure with no real meaning. For example if you bought a property twenty years ago and worked the rental yield out on todays market value the figure to you is useless. In that case you might work it out on whatever mortgage is left on the property, as thats in effect is the price you have to pay to own the property outright today today. When talking to an investor you work out what their rental yield is from what they have to pay from the house.
E
ein
Guest
and buried in KillarneySome say the devil is dead
N
New_Buyer
Guest
I agree, I think you need to use the current market value of the property.
serotoninsid
Registered User
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- 1,754
If thats how you work it out, whats regarded as a good rental yield then?
FintanPhelan
Registered User
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- 27
above about 5.5%