What is a Good Rental Yield?

Most financial advisers say the 5-8% range generally represents a good rental yield. However, the truth is there’s no industry standard for measuring an effective rental yield. Generally, the higher the rental yield, the greater the returns. However, this isn’t always true; low rental yield potential may simply mean the property is overvalued, and high rental yield potential could point to undervaluation. When owning an investment property, you should aim for high net rental yields that produce healthy cash flows where expenses are easily covered by rental income as this will leave you less vulnerable to market fluctuations.

RENTAL YIELD Vs. CAPITAL GROWTH

Rental yield isn’t the only factor you should be considering when weighing up an investment property. Another key variable is the value of that property over time, otherwise known as capital growth. For instance, if your property increases in value by 20% by the time you sell, it could prove a more profitable investment than a property with a strong rental yield that depreciates or even stays the same in value.

The concept of yield Vs. capital growth is often debated when investing. Obviously, the ideal scenario would be to find a property that shows a high yield and capital growth, which is possible if you understand the two concepts and take the time to do your research. However, depending on the market, you may need to choose one option based on your financial situation and investment goals.

Can you financially sustain a low rental yield to achieve a high capital growth return on the property?

Purchasing the right investment property for you, incorporates many factors, and we recommend that you seek advice from a financial advisor, or feel welcome to reach out to our knowledgeable and friendly team to guide you