Im new to all this property stuff and am trying to ascertain what is a good/acceptable rental yield on a property. Also, im expecting the IP i buy (depending on how much i pay) will be negatively geared approx $80-$100 a week. Is this a bad thing? ultimately im buying for CG, buy and hold for now, maybe do some renos at some point in the future. thanks for all your help!
As always- it depends on your strategy. If you are buying for growth as you say, then a bit of negative gearing is ok. $100 per week would be too much for me. I noticed that you mentioned Geelong in another post, you should not have to contribute that much in Geelong if you do your homework. Its an area which is not too bad for yield. I always aim for a minimum of 5% and usually, I will add value from the onset and get closer to 6% (including cost of reno).
The more cashflow the better, hence the greater the negative gearing the worse off you are. You need to be confident that the CG upside (which is speculative) outweighs your expense and meets your risk profile. Cashflow becomes a greater concern as you grow your portfolio so best to take it into consideration ASAP
It is a trade-off. For example you can get 6-7% yield in regional areas but low/no CG. You can get 3.5% yields for opposite ocean front that can have the highest CG. 5% is about an "average". Of course if you are negatively geared, you are expecting that CG will outweigh your losses over time. The ATO expects this too
A good yield is dependent upon several variables - type of property, location, age of property, investor's risk tolerance, interest rate, cpi etc. Q. How does a 15% yield sound? A. Not very sweet if you're paying 18% interest or if you bought it at 20% yield or there's a short term tenant who'll vacate next month and your rent will be a quarter of what this tenant was paying or you bought very cheaply but now need to spend $$$ to rebuild. The answer isn't always simple or clear cut.
Ask ten people, you'll get ten totally different answers. My minimum acceptable yield is currently 7.5%, for example. In Sydney or Melbourne? If so, I would say, yes it's a bad thing. My crystal ball is saying that they're close to the top of the market with either no or even negative growth in the next five years. But again, different people have different opinions about this. Where are you looking to buy, what are you expecting the market to do there and why?
This is a ' how long is a piece of string' type question, as the answer has many variables. For me personally, I don't like losing money to NG, so I look for a high yield, or something that I can ' play' with that will give me what I want within a pre-determined time frame.
looking to buy in thomastown or lalor, for a variety of reasons; they havnt yet caught up to reservoir/preston, u can get big blocks of land with houses pretty cheap compared to most of melb, the govt is doing a lot of spending in the area and there is good opportunity for employment.its still close enough to CBD and and has good infrastructure/transport etc
