Question 1

What is the difference between gross and net rental yield?

Accepted Answer

Gross rental yield is calculated by dividing the annual rental income by the property value, expressed as a percentage. It does not account for any expenses. Net rental yield takes into account all property-related expenses such as council rates, insurance, management fees, maintenance, and water rates, providing a more accurate picture of your actual return on investment.

Question 2

What is a good rental yield in Australia?

Accepted Answer

A good gross rental yield in Australia typically ranges from 4% to 7%, depending on the location and property type. Capital cities often have lower yields (3-5%) due to higher property values, while regional areas may offer higher yields (5-8%). Net rental yields are generally 1-2% lower than gross yields after accounting for expenses. A yield above 5% is generally considered strong.

Question 3

What expenses should I include when calculating net rental yield?

Accepted Answer

When calculating net rental yield, you should include all ongoing property expenses such as council rates, landlord insurance, property management fees, maintenance and repairs, water rates, strata or body corporate fees, and any other recurring costs. Mortgage repayments are not typically included in the net yield calculation but are important for determining your overall cash flow and gearing position.

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