View Full Version : expected yield?

11-10-2011, 12:56 PM

I am completely new to property investing, but am now looking at it as I have about 150K in bank earning practically nothing on interest.

I am going to buy property for the long term (10years appprox). It is the rental income that appeals to me as money earns nothing in bank these days. My question is - What is an acceptable rental yield? - 5%, 6%? I know there are plently of downsides (voids, bad tenants, upkeep etc)but as a rule of thumb what should I aim for?

Thanks in advance


11-10-2011, 13:20 PM
If it is a cash purchase, your yield is your true return on your money. As a result you have more flexibility, and the choice to look at properties that many investors would not look at - possible higher capital growth but lower income.

I personally aim for a minimum of 8% (prefer 10% plus) however that is because I buy with finance and therefore need to factor in possible rate rises. Some investors aim for 7%. As it is cash, your debt servicing is not an issue so you could go lower and as per comments above look at higher (potential) growth properties.

Whatever you do, keep a healthy contingency in case you have voids or non paying tenants.

11-10-2011, 13:39 PM
Many thanks for your help wickerman. much appreciated.

12-10-2011, 21:53 PM
You cannot go just on yield - every property is different. On the type of properties I have been looking at you also have to add in quite a 'margin of safety', which will put the 'apparent' yield up on purchase but the real yeild will be lower once your capital is used fixing it. Its not like buying NS&I bonds at RPI+1% which are yielding 6% or so. There are many things which maybe hidden when making a purchase and you can only control the risks of buying a badun to a certain extent as even if a surveyor gives it a clean bill of health.

I believe any yield should be at least 8% if not more.