What's a good gross yield today for residential properties? Still 10%

[Travellight]

Hi there, I'm new in the property investment field.
I have read some books, watched some webinars and attended courses. Most of them were written years ago and they refer to a gross yield of 10% as good investment. In reality, is it still common to achieve 10% today in residential properties? I found it's extremely hard to find such deal. Normally I would find a 5% or 6%. Looking forward to hearing your opinion!

[Beano]

Hi there, I'm new in the property investment field.
I have read some books, watched some webinars and attended courses. Most of them were written years ago and they refer to a gross yield of 10% as good investment. In reality, is it still common to achieve 10% today in residential properties? I found it's extremely hard to find such deal. Normally I would find a 5% or 6%. Looking forward to hearing your opinion!

Do not look just at the gross yields
There are many factors to consider in a investment
A few months ago i sold a unit in the capital city for a gross yield of 18pc as i thought it was a bad poor investment yet i brought some at 2.5pc that I believe are my best investment (residential)

[JBM]

Yes- always an offset to the yield aka HIGH YIELD = small backwater or old home needing huge funds invested etc..

I come across this 24% gross yielding ex-motel property used as multi-units rental flats .... But even though the low 300k price tag you had to pay 24k in rates pa and insurance 5k+ + landscaping lawns costs per fornight + mgmt costs ...low CAP growth backwater ....it didn't look anywhere as nice in the drive-by... I see its still for sale years later

[Bob Kane]

Why would anyone sell a property that gave a 10% yield?
Surely they would keep it for themselves?

[Don't believe the Hype]

Why would anyone sell a property that gave a 10% yield?
Surely they would keep it for themselves?

peoples motivations are an interesting beast.

it may be for any number of reasons such as
- diversification - wanting to change asset class as the individual is overweight in that asset class
- location - maybe they predict an upcoming problems in a location like a major employer closing
- free up cash - maybe midlife crisis dictates a sale is necessary to buy the new Ferrari
- better investment option - if you had a 15% yield investment available and needed cash you’d sell the 10%


I’m sure there are other reasons too but just a few I can think of off the cuff. Of course you’d push the sale to the highest price possible which might mean you sell at lower than 10% but if time is an issue maybe you’d take the cash.

[Anthonyacat]

Lots of other common reasons people would sell an awesome investment at a low price. I think Ronovations got in trouble in the media for pointing them out in a very un-PC way. What was it, deceased estates, divorcees and dummies?

It's true, 10% gross yields are pretty tough to find these days. You do need to remember that when those books were written interest rates were likely 7-10%, and they're now 4-5%. So naturally with such a massive reduction in holding costs, people are willing to pay more for a property, thereby decreasing yields.

But yeah, the 10%+ deals are out there. There's often a catch.

[Bob Kane]

Why would anyone sell a property that gave a 10% yield?
Surely they would keep it for themselves?

If they weren't desperate then they should double the price and sell it at a 5% yield.
So anything selling for a 10% yield is most likely dodgy - grab one if you're game.
A good investor could do it.
A new investor should avoid them.

[DaveW]

Can your 5% properties be turned into a 10% by doing improvements ?

I would target properties that can be converted to "home and income" types.

[Rosco]

If they weren't desperate then they should double the price and sell it at a 5% yield.
.

A value of a residential property often has nothing to do with the rent!

It's value is generally based on what value it would sell as a house to an owner occupier, and therefore what similar houses sold for.

Double the rent , does not equal double the value!

Ross

[DaveW]

A value of a residential property often has nothing to do with the rent!

It's value is generally based on what value it would sell as a house to an owner occupier, and therefore what similar houses sold for.

Double the rent , does not equal double the value!

Ross

You're right Rosco. Maybe Bob is mixed with commercial property. Its often the case where if you can look at ways to double the rent you will then have a big increase in value with commercial real estate.

[Rosco]

Agree, great if you can increase the rent in commercial
- more cashflow
- and more value