Property guide
Estimate what a property might return and compare opportunities faster. Two formulas, one worked example, and a calculator you can run your own numbers through.
Two formulas
Gross is quick enough to run on a listing while you are standing in the hallway. Net is the one that decides whether the property pays for itself.
Annual rent as a percentage of what you paid. It ignores every cost, so treat it as a filter rather than an answer.
Formula
(Weekly rent × 52) ÷ Purchase price × 100
Worked example. $620 a week on a $720,000 purchase:
($620 × 52) ÷ $720,000 × 100 = 4.48%
The same sum after the running costs come out, and with the buying costs added to what the property really cost you.
Formula
(Annual rent − Annual costs) ÷ (Price + Buying costs) × 100
Same property. $9,400 of annual costs, $38,000 to buy:
($32,240 − $9,400) ÷ $758,000 × 100 = 3.01%
Run your own numbers
Nothing is sent anywhere. The figures stay in your browser and update as you type.
The costs line
Miss one of these and your net yield is flattering. Most owners find the real figure lands well under the gross.
Council rates and land tax
Charged whether the place is tenanted or not.
Strata or body corporate fees
Apartments only, and often the single biggest line.
Landlord insurance
Building cover plus loss of rent and tenant damage.
Property management
Typically a percentage of the rent collected, plus letting fees.
Repairs and maintenance
Budget a yearly figure even in the years nothing breaks.
Vacancy
Two weeks empty is roughly 4% off the annual rent.
Comparing properties
Yield only means something when both properties are measured the same way. Run every candidate through the same set of assumptions before you rank them.
Getting the inputs right
Ask the managing agent what comparable places leased for in the last three months, not what they are advertised at. A $40 gap either way moves the yield by a quarter of a percent.
Pull the actual rates notice, the strata disclosure and last year's insurance renewal. Estimates rounded to a neat number are almost always low.
Net yield divides by price plus buying costs. Leaving transfer duty and legals out overstates the return on every property you look at.
Read it carefully
It is one input into the decision, and on its own it can point you at the wrong property.
Yield ignores capital growth, so a low-yield property can still be the better buy.
A high yield is sometimes the market pricing in risk: thin demand, or a single local employer.
Advertised rent is not achieved rent. Check what comparable places actually leased for.
Yield moves as soon as rates, strata or insurance change, so it is a snapshot, not a fixed return.
Next step
A Abis Memorial Exchange home loan specialist can put your figures next to the repayments and the buffer, so you can see whether the property covers itself.
The calculator is a guide only and produces an estimate from the figures you enter. It does not account for loan interest, income tax, depreciation or capital growth, and it does not take your objectives, financial situation or needs into account. Lending criteria, fees and terms apply. Speak with Abis Memorial Exchange and your own accountant before making a decision.
