On top of everything else you have to deal with when it comes to property management there are also rental yields. They happen to be a very important metric to consider when purchasing and also leasing out a property. What it essentially does is measure how much cash an income producing asset makes every year as a percentage of its overall value.

A rental yield measures how much rental income is generated in respect with the property’s value.

What it comes down to is dependent on whether you are talking about gross yield or net yield. Gross yield is the term most people within the real estate industry use as a quote when selling or advertising the property, it’s a lot easier to calculate and is basically a calculation of the rental price as a portion of the purchase price over 52 weeks.

Generally speaking, if you are looking for ways to build your property portfolio having a higher rental yield (more cash flow from your property) is ideal. However, if you are looking at increasing your capital growth, then rental yield isn’t necessarily the only thing to consider.

According to the experts, rental yields have been steadily declining in major cities like Sydney and Melbourne since the late 90’s. This means that a lot of investors have been looking elsewhere. Places like Cockburn and Rockingham offer investors not only more value for their money but also higher rental yields. These suburbs are made increasingly more appealing with the new initiatives by the government to improve infrastructure and turn once unfashionable suburbs into real estate hot spots. Many market specialists now believe the downturn in Rockingham has reached the bottom, so now is a great time to consider investing.

A great way to decide whether you want to focus on having a higher rental yield or capital growth is to ask our home loan specialists. Do your own research into suburbs that offer a higher return either from sale or rental income – and decide what your goals and objectives are before you make an offer.