For any investor, rental yield is a crucial criteria on deciding if a property is worth buying. In my opinion, even though you are buying a property for your own use, it is a criteria that you should be aware of. As my CEO always say:
Capital Appreciation is a by-product of Rental Yield
The simple calculation for Rental Yield is:
$$!Rental~Yield =dfrac{Annual~Rental} { Purchase~Price}times100$$
Typically, for Commercial and Residential properties, rental yields range from ~2% to ~4%. The difference will depend on the following factors:
- Tenure: 99 or Freehold (999 is almost freehold, IMHO)
- Type of furnishing: Bare, Partial or Full
- Location: Near to MRT and Facilities? Ground floor or upper floors?
In today’s market, the typical rental yield is as follows:
- Freehold. Usually around 2% to 3%. This is due to the higher purchase price of a Freehold property.
- A fully furnishing property tends to fetch a higher rental, resulting in a higher yield starting from 3%.
- A property near to an MRT will definitely fetch a higher rental but it may not reach 4% rental yield as the purchase price will be higher too.
As for Industrial properties, due to the shorter tenure (hence lower purchased price), one should be able to get at least 5% rental yield. Gone are the days when one can see around 10% yield…
As you can see, rental yield and purchase price is not a science. There is no hard and fast rule. This is why having a trusted agent with updated knowledge on the property sector is so important! If you need a more exact calculation, do read this post on Exact Rental Yield.
Recent Comments