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Understanding Rental Yield

4 Feb, 2022

Understanding Rental Yield

Have you ever wondered how much wealth you are building through your property investment? Or exactly how much profit are you yielding relative to your investment?

Rental yield is the answer to all questions for property investors and a guide to getting a high return. Rental yield can help you estimate the worth and possibilities of a property, whether it’s residential or commercial.

Continue reading to see if your current investment property or an investment property you are interested in purchasing has a strong rental yield.

What is rental yield?

Rental yield is the profit generated by your investment as a percentage of its value. Rental yield is used by investors to determine how much wealth they can create from their investments and to compare properties equally. A high rental yield equates to greater cash flow.

There are two forms of rental yields, gross yield, and net yield. There are also 2 ways to calculate rental yield based on these two forms. Gross yield is calculated through annual rental income and property value whereas net yield is calculated by including all expenses involved.

what is rental yield

What is gross rental yield? 

Understanding gross rental yield helps you determine if there is cash flow potential in your property or if you should invest elsewhere. The equation for calculating gross rental yield is to divide the annual rental income of a property by the purchase price or the property value.

Gross rental yield = (Annual rental income/Property value) x 100

Let’s say, you receive $20,000 each year in rent, and the property is worth $500,000. Your gross rental yield is equal to ($20,000 / $500,000) X 100 = 4%.

As mentioned, calculating your gross rental yield is useful when determining if your money can be invested better elsewhere. From the example above, you might have invested in an apartment with a gross rental yield of 4% but because the property value has increased and the rent has not risen proportionately, your gross rental income can be a bit lower.

This figure provides insight into whether you should consider selling your property, attempting to raise your weekly rental income or purchasing another property with a higher gross rental yield so you have more cash flow.

Hence, the primary function is to draw comparisons between various properties to make the best choice for you.

gross rental yield

What is net rental yield?

Net rental yield will provide you with the attributes of your property, the suburb, potential growth or the reasons for investing in an investment property. Moreover, a net rental yield figure will take into account additional costs such as fees, council rates, insurance, and other expenses related to property maintenance.

To calculate the net yield on your property, you will need to factor in your expenses for the property, which might include strata fees, maintenance fees and other legal fees. This will then provide you with a clearer understanding of the actual income return on your investment.

Net rental yield = [(Annual rental income – Annual expenses) / Total property cost] x 100

Let’s say, you receive $20,000 each year in rent. You pay $10,000 each year in property-related expenses, and the property is worth $500,000.

Your net rental yield is equal to (($20,000 – $10,000) / $500,000 ) X 100 = 2%

net rental yield

What is a good rental yield?

There is, in fact, no set ‘good rental yield’ percentage, it all depends on the unique characteristics of each property. In most cases, a higher rental yield equates to a bigger return, but this isn’t always the case.

High rental yields are preferable for investors since they produce a consistent cash flow. Generally speaking, investors should look for a property with a stable or growing rental yield.

Looking at median rental yields around the country might assist potential homeowners to figure out what their interests and ideal results are.

Australia Property Rental Yield Performance

According to the latest CoreLogic Home Value Index, the quarterly pace of growth in Australian rents has been easing since moving through a peak of 3.2% in March last year.

rental yield trend

Source: Gross rental yield across states – CoreLogic Home Value Index released 1 February 2022

There was a broad decrease in the annual rental growth in some states, most notable in Darwin, Perth and Hobart, with a more than 10% decrease in rent. On the other hand, the opposite rental trends are observed in other states, with Brisbane and Canberra now recording the fastest rise in rents, both up 2.3% over the three months ending January.

Although rents have been rising, property value has also risen at an above-average pace, pushing the rental yield in most cities to the lowest level on record. Sydney and Melbourne now remain as the only capitals where gross rental yields are lower than 3%.

gross rental yield across states

Source: Gross rental yield across states – CoreLogic Home Value Index released 1 February 2022

However, while the capital city trend slows, Australia’s regional markets remain high due to the increasing popularity of sea change and tree change trends.

Source: Gross rental yield across states – CoreLogic Home Value Index released 1 February 2022

Property markets with lifestyle characteristics such as Kiama and Wollongong in the Illawarra region, NSW are performing well, with both strong rental yields of 3.3% and 3.4% respectively, according to the latest SQM Research figure and record high in growth rates.

regional areas

St Trinity’s top-performing & above average rental yields

The key to locating high-yield rental properties is to look for suburbs with both low property prices and relatively high rental returns.

Here we list out our top suburbs with high rental yields from NSW and ACT (All figures are provided by SQM Research).

Australian Capital Territory

  1. Gungahlin, ACT 2912 – 6.8%
  2. Greenway, ACT 2900 – 5.9%
  3. Reid, ACT 2612 – 5.8%
  4. Woden Valley, ACT 2606 – 5.6%
  5. Belconnen, ACT 2617 – 5.6%

New South Wales – Sydney

  1. Fairfield, NSW 2165 – 4.3%
  2. Granville, NSW 2142 – 4.1%
  3. Villawood, NSW 2163 – 4.1%
  4. Liverpool, NSW 2170 – 4.0%
  5. Arncliffe, NSW 2205 – 3.9%

New South Wales – Regional

  1. Kiama, NSW 2533 – 3.3%
  2. Wollongong, NSW 2500 – 3.4%

All in all…

Gaining an understanding of what rental yield is and how it is calculated can help you determine potential profits and losses on a property you already own or on the one you’re looking to invest in.

Evaluating property values and their respective rental yields can be useful to invest your money wisely and dig your pockets deeper in return.

We at St Trinity work towards helping you find the right property to suit your needs and requests. Simply call us at 02 9099 3412 or contact us today by clicking on the button below!

AUSTRALIA PRIVACY STATEMENT

Last updated: August 2020

INTRODUCTION

St Trinity Property Group and its affiliated entities, representatives, agents and related companies (collectively referred to as ST TRINITY PROPERTY GROUP) respect the privacy and security of your Personal Information, as defined below, and comply with the requirements of the Australian Privacy Principles under the Privacy Act 1988 (Cth).

This Privacy Policy explains in general terms how St Trinity Property Group handles your Personal Information. However, it does not apply to St Trinity Property Group’s employee records to the extent they are handled by any of our companies that is or was the employer of that employee in relation to the employee’s current or former employment. Such employee records are generally exempt from the Act and will be dealt with as permitted by law.

You may be able to deal with us without identifying yourself (i.e. anonymously or by using a pseudonym) in certain circumstances. If you wish to do so, please contact us to find out if this is practicable in your circumstances. However, if you do not provide us with the Personal Information we have requested, we may not be able to complete or fulfil the purpose for which we collect the information, including providing our services. By visiting our websites, using any of our services or otherwise providing us with your Personal Information (or authorising it to be provided to us by someone else), you agree to your Personal Information being collected and handled as set out in this Privacy Policy.

WHAT PERSONAL INFORMATION DO WE COLLECT AND HOLD?

Under the Act Personal Information is defined as information or an opinion about an identified individual, or an individual that is reasonably identifiable, in whatever form and regardless of whether it is true or not (Personal Information). The Act also defines a subset of Personal Information as sensitive information (for example health records, racial or ethnic origin, religious beliefs, criminal records).

The types of Personal Information we collect and hold will depend on the circumstances of collection and on the type of service we are providing. For example, when we are engaged to sell a property, we may collect and hold Personal Information from both the seller and potential buyers such as name, address, email address, telephone numbers, employment details and details about their business.

We may also collect and hold certain sensitive information that is reasonably necessary for the provision of our services, including health and criminal records. If you provide us with any sensitive information, you consent to us collecting that information and handling it in accordance with this Privacy Policy.

HOW WE COLLECT PERSONAL INFORMATION

We may collect Personal Information about you directly when you deal with us over the telephone, send us correspondence (whether by letter, fax or email), have contact with us in person, visit our websites or complete hard copy or online forms.

There are also circumstances where we may collect Personal Information about you from someone else. For example, from:
• Market research companies contracted by us to obtain information so that we may improve and market our services;
• Your employer;
• Other agents and valuers who may be involved in the services we provide;
• Property developers who contract us to market properties;
• Publicly available information and databases;
• Any of the companies within the St Trinity Property Group (both local and overseas);
• and Anyone you have authorised to deal with us on your behalf.

We also automatically collect certain information when you visit our websites or our subscribers receive promotional emails from us via cookies and other tracking technology (such as web beacons), some of which may be capable of personally identifying you. Such information includes the type of browser and operating system you are using, your IP address and how you use our websites.
Depending on the type of service you or our customers have requested, we may also seek to collect information about someone else from you (for example, contact details of your solicitor, emergency contact person or tenant). However, you must not provide us with Personal Information about another person unless you have clear consent from that person to do so, told them that their Personal Information will be handled in accordance with this Privacy Policy and directed them to where they can find it.
Regardless of how it is collected, we handle Personal Information in accordance with this Privacy Policy.

WHY WE COLLECT, HOLD AND USE PERSONAL INFORMATION

We generally collect, hold and use your Personal Information for the purposes for which it is provided to us (which will usually be obvious at the time of collection), related purposes or as permitted or required by law. Such purposes may include:
• Acting as agent for vendors or purchasers in relation to the sale of a property;
• Acting as agent for owners or tenants in relation to the leasing and or valuation of a property;
• Project management services;
• Structured advisory services;
• Town planning services;
• Capital allowances services and other consulting services in relation to the property market;
• Administration of our business, such as collection of overdue commissions or outstanding fees;
• Responding to client enquiries and communicating with you from time to time to maintain contact and keep you updated on the services you have requested;
• Forecasting future needs of our services and general quality assurance and training purposes;
• Engaging in legal proceedings and/or enforcing judgments and/or orders;
• Complying with the applicable legal or regulatory requirements and/or orders of competent authorities;
• Providing you with promotional and marketing information, including market research reports, newsletters, event invitations and/or property market information relating to our products and services which we think may be of interest to you; and Any other purpose identified at the time of collecting your Personal Information.

We generally use information automatically collected by cookies and other tracking technology to identify you as a valid user, ensure that no one else can sign on simultaneously with your account from another computer and help us serve you better based on your registration preferences. We may also use cookies to help us facilitate any promotions or surveys that we provide. Third parties whose products or services are accessible on our websites may also use cookies, and we advise you to check their privacy policies for information about their cookies and other privacy practices.

DISCLOSURE OF PERSONAL INFORMATION

We may disclose your Personal Information to third parties as may be necessary for any of the purposes stated in the above section. Such third parties generally include:
Our third party providers, contractors, consultants, agents and/or representatives (such as law firms, banks, financial institutions, insurers, IT providers, mortgage referral services providers and/or wealth management services providers) who provide services to us or on our behalf, including to:
• Conduct valuations;
• Assist with obtaining payment from creditors;
• Operate data centres;
• Conduct market research;
• Provide advice;
• Potential buyers, tenants, conjunctional real estate agents and brokers for the purpose for which the information was collected or for related purposes (for example to complete a transaction on your behalf or provide you with a service that you requested); Anyone you have authorised to deal with us on your behalf;
• Any of the companies within the St Trinity Property Group and their related companies; Government authorities, regulatory bodies, law enforcement agencies, courts, tribunals and/or parties to the legal proceedings where you have consented to this or we are required or authorised to do so by law;
• Debt collection agencies; and/or Any other third parties identified at the time of collection of your Personal Information.

DISCLOSURE OF PERSONAL INFORMATION OVERSEAS

Some of the third parties listed above to whom we may disclose your Personal Information are located overseas. For example:
Our information technology and business process service providers that are located in countries including (but not limited to) the Indonesia, India and Philippines; and Our overseas clients that are located in the same countries as the companies within the St Trinity Property Group.
Our contracts with these parties generally include an obligation for them to comply with Australian privacy law and this Privacy Policy.
However you acknowledge that, by agreeing to the disclosure of your Personal Information to these entities outside of Australia, we will no longer be required to take reasonable steps to ensure the overseas recipient’s compliance with the Australian privacy law in relation to your Personal Information and we will not be liable to you for any breach of the Australian privacy law by these overseas recipients. On this basis, you consent to such disclosure.

ACCESS, UPDATE AND CORRECTION OF PERSONAL INFORMATION

We take reasonable steps to ensure that the Personal Information we hold about you is accurate, complete and up-to-date. However, we also rely on you to advise us of any changes to your Personal Information. If you are able to access your Personal Information by logging on to an account you have with us, it is your responsibility to ensure your information is accurate, complete, relevant and up-to-date.
On request we will provide you with access to the Personal Information we hold about you, including for the purpose of correcting or updating that information, unless otherwise required or permitted by law.
There is no charge for making the request or giving the access to your Personal Information. We will deal with your request within a reasonable period after the request is made.
If we refuse to provide you with access we will provide you with a written notice that, at a minimum, outlines reasons for the refusal and the complaints mechanisms available to you.
If you wish to access the Personal Information we hold about you or to update or correct it, you can either do so by logging on to your account (if you have one) or contact us using the contact details provided below. We will require you to verify your identity and specify what information you require.

SECURITY OF PERSONAL INFORMATION

We take reasonable steps to protect any Personal Information that we hold from misuse, interference and loss and from unauthorised access, alteration and disclosure. For example, we implement IT security procedures including password protection, firewalls and site monitoring and we store your Personal Information on a secure server.we store your Personal Information on a secure server.
However, data protection measures are never completely secure and, despite the measures we have put in place, we cannot guarantee the security of your Personal Information. You must take care to protect your Personal Information (for example, by protecting any usernames and passwords). You should notify us as soon as possible if you become aware of any security breaches.

DIRECT MARKETING

When you register as a member on our websites, you will be given a choice as to whether you want to receive e-mail messages from us, including newsletters, announcements and e-mail communications about our latest news, products or services. To the extent the relevant local law requires us to seek your consent, we will only send such messages to you if you opt-in. If you do not wish to receive direct marketing calls or materials, you may use the unsubscribe facility in the marketing communication or contact our Chief Privacy Officer using the channels prescribed below. Further, as a registered member with us, you can modify your choice at any time by accessing your registered account with us. We will stop using your Personal Information for direct marketing if you so request.

PRIVACY ON OUR WEBSITES

Our websites may contain links to the websites of other entities. If you click on such links, you will be transferred to the websites of these entities. We have no control over, and are not responsible for, the privacy practices of these entities. You should read the privacy policy of these entities to find out how they handle your Personal Information when you visit their websites.

WHAT IF YOU HAVE A COMPLAINT?

If you wish to make a complaint about a breach of this Privacy Policy or the Australian Privacy Principles of the Act you can contact us using the contact details below. You will need to provide us with sufficient details regarding your complaint together with any supporting evidence. Our Chief Privacy Officer will investigate the issue and determine the steps that we will undertake to resolve your complaint. We will contact you if we require any additional information from you and will notify you in writing of the outcome of the investigation. If you are not satisfied with our determination, you can contact us to discuss your concerns or contact the Australian Privacy Commissioner via www.oaic.gov.au.

PRIVACY & SITE CHANGES

St Trinity Property Group may update this Privacy Policy from time to time so please review it periodically for changes. If the changes are significant or substantive, they will either be advised to you in writing or posted on our websites at www.sttrinity.com.au. Your continued use of our websites or services, requesting our assistance or the provision of further Personal Information to us (directly or via an authorised person) after this Privacy Policy has been revised, indicates your acceptance of the revised Privacy Policy.

OUR CONTACT DETAILS

If you have a query relating to this Privacy Policy or wish to make a complaint, please contact us using the following contact details:
• St Trinity Property Group
• Chief Privacy Officer

• PO Box 1235
• Menai NSW 2234
[email protected]

MORE INFORMATION

For more information about the Privacy Act in Australia and protecting your privacy, visit the (external link) website below:
oaic.gov.au