WHAT IS A GOOD INVESTMENT PROPERTY RENTAL YIELD IN 2016
Having a good rental yield can be the key to unlocking the right amount of cash flow for your investment. But it’s not just cash flow that is important for the property investor. Having strong growth prospects will help to increase your net worth position so you can continue to build your portfolio. So, what percentage should investors aim for in the Sydney market and how does this differ to other locations? Nathan shares his views.
RENTAL YIELD IN SYDNEY IN 2016
While Sydney home values have undergone spectacular growth over the past few years, rental rates have remained somewhat sluggish. According to Nathan, over the next 12 to 24 months, this is set to change. He predicts rents to rise higher than the norm, with the possibility open for yields as high as 7 per cent.
In the meantime, Nathan says, investors entering the Sydney market should aim for a yield of no less than 5 per cent. It is still possible, to achieve a 6 per cent yield in the Sydney area, says Nathan, provided your mindset is creative and open to change. He has been able to achieve this amount of yield by building on land that he has purchased well below market value on the outskirts of Sydney.
RENTAL YIELD IN SURROUNDING AREAS OF SYDNEY
If purchasing in the metro areas around Sydney, such as Newcastle, the Blue Mountains and Wollongong, investors should aim for a higher yield of 6 to 7 per cent, says Nathan.
RENTAL YIELD IN REGIONAL NSW
While it is possible to achieve greater yields in regional cities, such as Tamworth, Orange and Bourke, growth prospects are nowhere near as good as they are in metro areas and capital cities. It is for this reason that Nathan steers clear of investing in regional areas. A 10 per cent yield may bring in good cash flow in the short term, but lack of capital growth, lack of demand and lack of population growth may result in bleak prospects for the future.
RENTAL YIELD IN BRISBANE AND THE GOLD COAST
For those investing in the metro Queensland market, a rental yield of 7 to 8 per cent is still achievable in the 2016 market. When taken into account with the excellent growth potential in metro Queensland, and the fact that Queensland prices have stayed undervalued for a long time, a starting yield of 7 per cent is far from being a trade off between achieving short term cash-flow and building long term equity.
What percentage yield have you been able to achieve in your investing? Please share your experiences in the comments section below.