Gross yield is a starting point
Gross rental yield is annual rent divided by the purchase price. It does not deduct vacancy, maintenance, management, taxes or financing costs, so it is not the same as net return or positive cash flow.
Build a realistic holding budget
Estimate rent received and ongoing expenses separately. Allow for empty periods, repairs and changes in loan repayments. Borrowing can increase both gains and losses; a low initial payment does not represent the full cost of an investment.
Use comparable evidence
Compare properties of similar type, size, condition and location. Review transaction dates and sample sizes when using market reports. Capital growth and rental demand are uncertain; neither a forecast selling price nor a target yield guarantees a profit.
Adapted from MadFly PropMart’s original guides. Historic rates, tax concessions and numerical thresholds are not reproduced as current advice. Original source
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