Important calculations when looking to invest...
When choosing to make a property investment, the most important thing you can do is to approach the transaction
as a business decision.
You are not buying a home - which is an emotional purchase, and as much about listening to your heart as to your head. The property investment dream is to secure a high yield property in an area which will ultimately allow you to make good capital gains.
Therefore one of the most important calculations you will need to make is what the yield of a particular property will be. Yield is simply the rent a property could earn over a year, expressed as a percentage of the purchase price: Example, a $350,000 property rented at $350 a week will return a gross rental yield of 5.2%.
You can then use this figure to compare the returns you could get from a property against those provided by other types of investments, such as shares or bank deposits.
Whilst the gross rental yield is a simple calculation to use it's important to note that it doesn't take expenses into account. A property may have a high rental yield but may also have high expenses, making the rental return low when taken into consideration.
If you do want to want a more precise calculation you will need to know (or estimate) the total expenses of property including both purchasing and transaction costs (legal fees, building inspections, any start up loan fees, etc.) and annual costs such as vacancy costs (lost rent and advertising), repairs and maintenance, property management fees, home and contents insurance, rates etc.
As a general rule of thumb, cheaper houses will achieve better yields than more expensive properties.
Knowing all the extra costs can be daunting, however a Harcourts Twiss-Keir property manager can put you in touch with finance and tax specialists for assistance when deciding on an investment property.
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Poll: Do you set New Year’s resolutions?
🎉 2026 is almost here!
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