Rental yield helps assess the financial viability of a property. This, in turn, enables you to gauge a specific deal’s attractiveness or compare different commercial real estate opportunities. Continue reading to learn more about what an excellent rental yield is.
What is Rental Yield?
The rental yield is a metric used to calculate the ROI of a rental property. It is calculated annually as a percentage, enabling investors to gauge the property’s profitability based on its rental income. To understand the property’s return thoroughly, it’s crucial to distinguish between gross and net yields.
What is Gross And Net Rental Yield?
To determine a property’s potential return, you can calculate its gross yield by dividing the annual rental income by the property’s total value and multiplying it by 100. This calculation does not include any expenses or costs associated with owning the property. If you want a more accurate estimate of the property’s actual return on investment, you should calculate its net yield. This considers the property’s operating expenses, such as maintenance costs, property taxes, and insurance. The net yield provides a more realistic picture of the property’s profitability by factoring in these expenses.
Factors That Influence A Good Rental Yield
- Location: The demand for rental properties and prices are heavily influenced by location. Higher-demand areas tend to have higher rental prices.
- Property Type and Quality: Tenants are attracted to well-maintained properties with desirable amenities, leading to potentially higher rental yields
- Real Estate Market Conditions: Higher rental income is achieved in high-demand markets with low vacancy rates. Conversely, rental income decreases during economic downturns or oversupply.
- Property Management Costs: Fees for professional property management services impact net rental income. These costs should be considered when calculating potential returns.
Trust the Professionals at Clagett Enterprises for Your Realty Needs
If you’re looking for an experienced property management company, the perfect realtor for your property, or a professional to assist you during your purchase of any home, you can rely on Clagett Enterprises. Clagett Enterprises is a full-service real estate company with almost 30 years of experience in the Frederick and Western Maryland area. For assistance with commercial sales, leasing, management, development, and consulting, contact us online or give us a call at 301-665-6009. To meet our team and see some of our beautiful homes, follow us on Facebook, Twitter, and Pinterest.