I'm a first time investor doing market analysis on different suburbs in Brisbane. Is there a magic formula like - $500k house should get $500 a week rent?
Yes & No. Yes because if you assume a 5% rental yield then $500K house rents at about $500pw. No because you cannot assume a 5% RY for every house - ie at the beach areas it is not uncommon to see 3% RY for example. Likewise in country areas you can often get 6-7% RY's.
Often there is no relationship between the price of the house and the rent it can generate. Think of a shabby, leaking, run down old house on a huge block of land in a prime suburb - you may pay millions (land value) but struggle to get a few hundred dollars a week in rent. “$500k house getting $500 a week rent” (5%) formula is often used the other way around - to figure out the return on your investment. Marg
If it's a "buy hold and pray investment strategy" Then rental income about the same as interest on the loan is not a bad place to start. Below about $500k the $100 week rent for every $100k of loan is a rule of thumb I have seen suggested in articles.
