Rental Yields- gross or net

[Habib123]

Ok so I'm realtively new to property investing and have done some general reading on the subject;

one thing I don't get is rental yields. Some people say 4% is good ,,others say 7%... but what are they comparing it to ? other btls in the surrounding area of similar price or sizes ? I'm just trying to understand how to interpret this figure.

for a landlord, should they always use net yield or gross yield when measuring the performance of their portfolio ?

Finally how do professional landlords cover void periods in their property - does landlord insurance take care of this or do they have to pay the bills out of their own pocket if one of their properties is empty ?

 

[Longterminvestor]

The rental yield on a property needs to be considered against the prospects for capital appreciation in the short, medium and long-term. What you tend to find is that properties with a relatively high yield have relatively low capital appreciation while those with a relatively low yield can attract relatively high capital appreciation.

 

[Habib123]

How can a low yield or any yield for that matter influence the level of capital appreciation ? Surely capital appreciation and property prices are driven by what is going on in the area the property is in...regeneration, thriving local economy, jobs etc.

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[lookinginvest]

I think what he means is that areas where properties have a high rental yield tend to have low prospects for capital growth and vice versa.

 

[FWL]

One tip I have heard many times is to assume that your property will be rented for 10 months of the year and use this income figure in your calculations. If it is fully let then that is a bonus but using 10 months allows you to err on the side of caution

 

[realdeals]

If you see a high yielding property which is being sold with potential for high capital growth as well, run for the hills! You never get high yields and high capital growth in my experience.

 

[FWL]

Very true - you are highly unlikely to come across potential high capital growth and high rental yield properties. If there is a chance of relatively high capital growth then investor will nibble away at it until it reaches a level where the rental income is relatively low - and vice versa.