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Investment Yield Guides

Understanding Investment Yield %

Example

In 2006 a 3 bed property in Lucan was on the market for €390,000. This had a rental income of €15,600 per annum (€1300pm).

For an investor this produced a return on their investment (yield) of 4%

When the markets were favourable a return of 4% was typically a good return, this would fall in the acceptable range of 4-6%

However……

With the decline in house prices and the steady rental incomes if such property was to be bought at Auction today it would achieve a much higher return for an investor.

In today’s market investors are looking for returns in the regions of:-

Residential:     8-10%
Commercial:    8-12%
Land:                 10%

Therefore by 2011 in a distressed property auction the price guides for this house would see it possibly achieve an asking price of €120,000 at Auction. The rent would be steady at €13,800 per annum (€1,150pm) which would mean that the investment yield has now risen to 11.5%.

Calculation of Yield %

Yearly rental income divided by Purchase Price of property multiplied by 100.