what is a good rental yield in australia?

Ideally, investors should aim for a gross rental yield above 5.5, as this demonstrates the stability of rental income. Typically, a property with a high rental yield implies that it is undervalued or below market value.

what is a good rental yield in australia?

Ideally, investors should aim for a gross rental yield above 5.5, as this demonstrates the stability of rental income. Typically, a property with a high rental yield implies that it is undervalued or below market value. This is usually considered to be between 8 and 10%. Whereas a property with a low rental yield, which is between 2-4%, may mean it is overvalued.

A good rental yield in Australia is between 7-8% in capital city suburbs. In regional areas, houses offer rental yields of 12-13%, while rental yields of 8.5-11% can be expected. The answer to what is a good rental yield depends on where you plan to buy. In addition to cash flow, investors must be able to generate profits from the rental property.

The most commonly used metric for determining profit is cash on yield, because it takes into account how the investment property is financed. Experts say that a good rental property can generate a return of around 8% or more. The rural town of Mooroopna, 181 kilometres north of Melbourne, offers the best rental yield for units at 6.84 per cent. According to SQM Research data, the gross rental yield in Brisbane is 5.2 per cent for houses and 3.7 per cent for units.

According to SQM Research data, the gross rental yield in and around Sydney is 2.5 or houses and 3.4 or units. Investors tend to seek properties with rental yields above 5.5 due to the stability of rental income. The COVID pandemic has affected Brisbane's rental market, but not as dramatically as in Sydney and Melbourne. CoreLogic found that in the metropolitan suburbs, at their peak last year, there were homes and units with rental yields of five to eight per cent.

Figures from Digital Finance Analytics revealed that rental stress was 38.65 per cent (or 1.966 million homes) in September. Properties with a high rental yield would be best for investors looking to improve their cash flow. Gross rental yield is the annual rent divided by the value of the property, while net rental yield takes into account total property expenses, including stamp duty, legal fees, loan fees, building inspections, repairs and maintenance, management fees, insurance costs and other fees and charges. Corio, one of Geelong's largest suburbs, has the highest residential rental yield in Melbourne at 4.63%.

Investors use rental yields to assess their investment income and to compare properties. The inner Wheatbelt suburb of Merredin has the highest house rental yield in regional Western Australia at 13.83 per cent. If you want to invest in property, it is important to understand what rental yields are and how they work, to ensure a good return. As there is no defined "good yield" percentage, it all comes down to the different characteristics of each property.

According to them, if the gross rental yield potential of a property is four per cent or less, the property is most likely overvalued for investment purposes.

Courtney Thomson
Courtney Thomson

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