The purchase of an investment property is ultimately a form of capital investment. As with any investment, a key factor is how economical or profitable the investment is.
The purchase of an investment property is ultimately a form of capital investment. As with any investment, a key factor is how economical or profitable the investment is.
The rental yield of a property is the ratio between the and the rental income generated by the property and the investment amount, i.e. the purchase price of the property. The rental yield is used by investors during a purchase to compare different properties with each other. The rental yield is usually expressed as a percentage. A higher rental yield means the property is expected to generate more money relative to its acquisition cost.
To calculate the gross rental yield of a property, divide the gross annual rent by the purchase price: Gross rental yield (in %) = (gross annual rent / purchase price) * 100.
To calculate the net rental yield of a property, divide the net rental income (gross rents minus management costs) by the total purchase costs (purchase price plus closing costs): Net rental yield (in %) = [(gross annual rent - management costs) / (purchase price + incidental purchase costs)] * 100
The net rental yield is usually more meaningful than the gross rental yield, as it takes more actual costs into account that are ignored when calculating the gross rental yield. However, real estate ads often mention only the gross yield because of its larger value.
We have asked our brokers to share their expertise with you; visit our blog where you will find everything you are looking for!
Check out our latest blog posts
Appraise your property online in 2 minutes.
Free of charge, no strings attached.
Wondering how much you can afford to spend on your dream property? Give a try to our easy calculator.
Benefit from a 15-minute consultation with one of our experts.
Benefit from a 15-minute consultation with one of our experts.