What is a Good Rental Yield?
So, the question we’ve all been waiting for. What is a good rental yield? What should you be aiming for?
There is no universal answer to this question, as determining the strength of an investment depends on numerous factors. In an ideal world you'd aim for 7-8% however, it is definitely worth noting though, that this isn’t the one and only answer.
Other factors that should be taken into consideration, include but are not limited to:
- Is the property in a desirable location, near amenities, near public transport? etc.
- What capital gains can be expected?
- Is the purchase price good?
- Have you done work on the property?
- Are there any local developments that might damage the property of the value eg. plans to further develop a nearby airport?
- Are there any signs indicating a property bubble in the area?
- Is the state introducing tighter rental regulations?
- How long do you plan on holding the property?
- What is your overall investment strategy and how does this property play into your long term financial goals?
A high rental yield is certainly a good thing to have. However, the best investors consider as many facets of their investment as possible to help themselves achieve the best returns from their investment portfolio in the long run.
Increasing Cash Flow for a Good Rental Yield
- Choose markets with high rental demand and manage your leases well;
- Spend money to make money: Simple renovations like a fresh repaint will allow you to enjoy premium rent;
- Rent by the room;
- Increase marketing efforts to avoid vacancy;
- Utilize all income producing assets in your property (parking lot, laundry room, etc).