Yield = Annual Rental Income/ Property Purchase Price
A yield is simply the return on investment achieved on a property from the rental income only. We will discuss how to look at property investment strategy later on in the video series, but for now, just remember that yield is just one part of a successful investment. Investing just for yield is naïve and will create very inconsistent investments.
In the property world, we often have gross yield, which is annual rent divided by property purchase price, then net yield is this minus normal property costs such as service charge and ground rent.
Occasionally we will also say “net net yield” which is annual rental income, minus annual costs, including mortgages, taxes, upkeep, divided by the property purchase price.
At Baron & Cabot we look at the latter in the cash flows that we build for you.
Remember ROI is the goal, not just price, yield or growth, overall ROI and understanding how to effectively predict it is the secret to investing correctly every time.