Folks,
Without getting into property price speculation could someone explain how to calculate Gross and Net rental yield to include a mortgage payment each month and a downpayment. Is income tax taken into the equation?
Very confused
Thanks
So, if I bought a property with a sitting tennant paying €400 per week for the ground floor, still leaving 2 overhead floors with separate entrance vacant, is that a good deal at €300,000 ?
So, if I bought a property with a sitting tennant paying €400 per week for the ground floor, still leaving 2 overhead floors with separate entrance vacant, is that a good deal at €300,000 ?
That's €4,800 per annum. Assume you could rent the other two floors for the same price. That's a total of €14,400 which is a gross yield of 4.8%. From that you will deduct various costs, maintenance charges, and any vacant periods. On the remainder you will pay tax. If you're very lucky you will make 1 or 2% (being very optimistic) more net yield than putting the money in the bank where a) your money is available in short order instead of tied up in a highly illiquid asset, b) you do not have the headache of managing a property and dealing with tenants (or paying someone else to do so) which is not accounted for in the above figures.
If you are prepared to tie up your money then government savings would probably produce a better return (depending on your tax status). There are other ways of investing your money in property (e.g. REITs being discussed on another thread here) that don't involve the same tying up of your money, but involve other risks. However, even money in the bank is not risk free these days.
On the whole I would say 4.8% gross yield for the effort involved is very poor. (Just my personal opinion and I have little experience of any of these things so take with a large pinch of salt).