When investing in residential property, one of the key factors to consider is your net return on monies invested.
This will be a primary indicator on whether or not to proceed. To assess the net return, you will have to compare it with the average returns for similar properties. Too low a return may mean that alternative investments should be reviewed, while a very high relative yield may mean there is an accompanying risk factor that is higher than normal.
Please remember, areas that produce lower yields predominately have a higher capital gain and at the end of day that is what it's all about when investing your money in property.
The yield is calculated by starting with the purchase price. This is the denominator. The numerator is your new yearly income.
To figure out the new income, you take your yearly gross rent and subtract your outgoings. Outgoings for residential properties include your managerial fees paid to the letting agent, council and water rates for the year, estimated repairs and maintenance and land tax if applicable. You should set aside a yearly amount for repairs and maintenance, since big expenses occur periodically and not necessarily yearly.
For independent advice on your investment property, please contact our team today on 02 9960 1066 or enquiries@pkproperty.com.au.