Whether it is worth holding.
WHAT RETURNS COME FROM
Rental income Capital appreciation
WHY BOTH MATTER
Income sustains you; appreciation builds value.
WHAT TO CALCULATE
- Gross yield: annual rent against purchase price
- Net yield: after costs
- Cash return: after financing
WHAT COSTS TO DEDUCT
Management Maintenance Insurance Taxes and levies Void periods Agency and letting fees
WHY VOID PERIODS MATTER
Property is not let continuously, and ignoring that overstates returns.
WHAT TO ASSUME
A realistic proportion of the year unlet.
WHAT MOST INVESTORS OVERSTATE
Rent achievable Occupancy Appreciation
WHAT MOST UNDERSTATE
Maintenance Transaction costs Time required
WHAT TRANSACTION COSTS INCLUDE
Legal fees Consent and registration Agency Survey Stamping
WHY THEY MATTER
They are substantial and they affect the return on a shorter hold.
WHAT TO ESTABLISH BEFORE BUYING
The net yield, calculated conservatively.
WHAT TO COMPARE IT AGAINST
Other uses of the same capital.
WHAT APPRECIATION DEPENDS ON
Location and what happens around it.
WHAT TO BE REALISTIC ABOUT
That it is not guaranteed, and that property is illiquid.
WHY ILLIQUIDITY MATTERS
You cannot sell quickly when you need cash.
WHAT TO AVOID
Investing money you may need.
