Gross Yield & Net Yield
Yield is something that every investor cares about when purchasing a real estate.
There are two types of investment yields. Gross Yield and Net Yield.
The yield you see on property outline or property information on the internet is almost always a gross yield.
Gross yield is calculated as
Projected full occupancy annual rent / Purchase Price
Net yield is calculated as
(Projected full occupancy annual rent – Annual running costs) / (Purchase Price + Closing Costs)
The higher the gross yield the better but don’t think that’s always the best.
Even if the gross yield is high, it means nothing unless vacant rooms are filled.
Even if the gross yield is high, it means nothing if its running costs are very high.
Purchase price usually doesn’t include fees such as brokerage fees, closing costs, taxes, and registration fees.
Pay attention to net yield as well.
Do NOT just rely on gross yield.
Pay attention to net yield as well as cash flow.
- Sale by Private Contract & Sale by Auction
- Price Limit Order
- Settlement & Ownership Transfer
- Ways to Search for Properties
- Documents & Points to check
- Ways to find legit real estate agents, narrow them down, and become their favorite customer
- Gross Yield & Net Yield
- Letter of Intent
- Important Description & Sales Contract