How to Calculate Rental Yield accurately? (Episode 20)

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A lot of people are looking for a property with a high rental yield.
Because high rental yield can generate good passive income.
However, how long for the rental income to breakeven with your cost?

Hello, I’m the property strategist Stephen Chong. My channel is about property investment. And today I’m going to share how to Calculate Rental Yield accurately.
How to Calculate Rental Yield…accurately?
First, you got to work out the Total Yearly Cost.
Which is = Loan interest per year + maintenance fee per year + property tax + income tax + mortgage insurance + agent fee
Net Rental Income (pear year) = Monthly Rental x 12 – Total Yearly Cost
Net Rental Yield = Net Rental Income per year / Price x 100%

I’m taking a $1 million resale condo as an example,
Monthly instalment = $2,772 whereby loan interest = $1,250 and principal = $1,522
Loan interest per year = $1,250 x 12 = $15,000
Maintenance fee per year = $250 x 12 = $3,000
Property tax = $3,000
Assume monthly rental = $2,500
Agent fee = $1,250
Income tax & Mortgage insurance = subject to individual, so I take it as $2,500 per year for easy calculation.
Total Yearly Cost = $25,000
So, the Net Rental Income per year = $5,000
Therefore, the Net Rental Yield = $5,000 / $1mil x 100% = 0.5%

My Opinion:
It is so much lower as compared to the Gross Rental Yield which is 3.0%.
However, your cost is fixed, what you can do is to find out the way to increase your rental income.
If you are keen to find out the strategy to increase your rental income, you may contact me for further discussion.
That’s all for today. In the next episode, I will discuss the Dilemma between Capital Gain and Rental Income, which is the better deal for you.

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