Rental yield is the annual rental return from a property, or the amount of rent the property earns over a year. It is expressed as a percentage of the purchase price.
The higher the yield, the better the return.
It is calculated this way:
rent x 12 months
------------------------- x 100
purchase price
To work out the net rental yield, you will have to subtract maintenance costs, commissions and other expenses from the rent figure. If you have spent money on renovation, add the amount to the purchase price.
In Singapore, rental yields of 3 to 4 per cent are common.
Why is it important?
It gives you an idea of the returns from your property investment and allows you to compare different properties.
As one of the indicators of the investment potential of a property, it can help you decide on the purchase of an investment property. So
you want to use the term? Just say...
'I want to buy property in District 9 or 10 because I hear the rental yields are good.'
This article was first published in The Straits Times on January 11, 2009.
