In the everyday world nobody really understands percentages.
Most of us need a calculator to figure them out!
But what we do all understand is that we want to get a return on our investment.
Even if we all have different goals, like retiring early, leaving the everyday grind behind, or having the freedom to do what we want, there is a common thread.
The one basic thing we all need is something in return for our efforts. After all, that’s the point of investing!
So how do we figure out what that return is? And what is an acceptable gross yield?
I find that the whole gross yield and net yield thing is interesting.
Gross yield is simply an equation dividing your rent by your purchase price. Net yield is the same thing but taking into account your costs.
But what does a percentage mean in real dollar terms?
It’s important to look further and understand what the actual cost to you is, which will indicate what your investment is potentially going to make you.
So we can float around percentages as a quicker measure.
But that measure has to correspond to what your interests rates are today.
If your gross yield or net yield percentages are over and above what your interest rates are, then you can make the assumption that the property is cash flow positive.
But really that’s not enough, because you might have a strong gross yield, but you could be sitting at a small return per week because you focused on the percentage instead of the bigger picture.
Or you might have a smaller figure for gross yield but the overall growth for that property might be strong, which might suit your goals.
So there are lots of different measures to take into account. Yes, it is a lot to follow!
But you need to understand how to run the numbers and the percentages while also being mindful of the details.
This is how you’ll truly know what you are getting out of your investment.
As a Property Coach it’s our job to support you on your investing journey. Our experience can help you navigate all of the challenging parts and help things go much more smoothly than they would if you were trying to do everything on your own.
Property investing is a long-term process with many steps, so it certainly helps to have some support along the way.
Think of it like building a team – you have legal, accounting, finance, and your Property Coach providing strategy and watching your back.
If you’re trying to do it alone you’re likely to only get so far. Nobody can possibly know everything. And in truth, if you are the smartest person in your team because you are the only member, then you are always going to be disadvantaged.
Join me this Wednesday for a South Island Online Property Masterclass. I’ll be sharing useful information both new and experienced investors can benefit from. Plus my own unique perspective on setting yourself up for financial security with property.
Reserve your seat now – and be sure to follow the instructions in the confirmation email to get your unique webinar link.
See you soon!
– Lisa De Vries
Property Coach and Head of Education