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Investment Advice

What is a yield? – Charlotte Cossar

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Ipswich Investor, Investment properties, Property Management, Real Estate Ipswich, Mortgage Broker Ipswich, Ipswich property market, Ipswich Rental Properties, yield, gross yield, net yield, average yield, total return

Anyone considering buying an investment property will be interested in what return the property will give them – in other words, its yield.

Ipswich Investor, Investment properties, Property Management, Real Estate Ipswich, Mortgage Broker Ipswich, Ipswich property market, Ipswich Rental Properties, yield, gross yield, net yield, average yield, total return

Before starting to look seriously at a property, most investors work out the yield on the property to see if it makes their shortlist. Although some investors buy property for other reasons – landbanking, infrastructure potential or lifestyle reasons – most are only concerned with its current return and potential yield.

Before we get into the complexities around yields and how to work these out, it’s helpful to understand the different terms.

Investment terms explained

Yield – A yield is a measurement of future income on an investment. It is generally calculated annually as a percentage, based on the asset’s (or investment’s) cost or market value. It has nothing to do with a capital gain on a property.

Gross yield – If you think about your ‘gross earnings’, then you are on the right track. A gross yield is the income on an investment prior to expenses being deducted. For property, these expenses can be quite substantial so there can be a huge difference between gross and net yield.

Net yield – As you can expect from above, the net yield is the income on an investment after expenses have been deducted. The costs and expenses could include purchasing and transactions cost. For example stamp duty, legal fees, pest and building inspections, loan start-up fees and vacancy costs, including lost rent and advertising. There might also be repairs and maintenance costs, management fees, insurance, rates and charges. Most of time, these costs won’t be known so you will have to estimate these.

Return or total return – Also quoted as a percentage, a return includes capital gains. It is the gain or loss of the investment in a particular period (this isn’t necessarily annual as for yields). This is retrospective, so it is generally an accurate or concrete percentage.

Average yields – It is always good to know what the average yield is for the area that you are looking to invest in, but every property is different. Don’t take these as gospel as to how much yield you may get on your property. What is the difference between yield and return?

As explained in the definitions above, a yield is only based on income, whereas a return includes capital gains. Although both might be used in the sales patter, find out the time frames of both before making any decisions on whether the property you are looking at is a good investment.

Remember, though, one is retrospective (return) and the other looks at the future (yield).

A yield is only based on income, whereas a return includes capital gains

How do you work out a yield?

When looking for investment property, you will notice agents dropping in comments on yields. What you have to be aware of is that most of them will be referring to the ‘gross’ yield and not the ‘net’ yield. Make sure you ask which one they are quoting. It is also worth knowing how to work out the gross and net yield of a property so you can calculate them.

Gross yield = annual rental income (weekly rental x 52) / property value x 100

For example: Property purchase – $450,000 Weekly rent – $375 ($375 x 52) = $19,500 /$450,000 x 100 = 4.3%

Net yield = annual rental income (weekly rental x 52) – annual expenses and costs/ property value x 100

For example: Property purchase – $450,000 Weekly rent – $375 Annual expenses – lost rent and advertising $1,075, repairs budget $600, insurance $1200 = $2875 ($375 x 52) = $19,500 – $2875 / $450,000 x 100 = 3.69%

What does a ‘hard’ or ‘soft’ yield mean?

Demand for property drives property prices up and this can affect the yield of your investment property. The more prices go up, the less the percentage between rents (income) to property value. When you hear people referring to yields hardening, this means the yield falls or reduces, whereas when they refer to yields softening, this means they are increasing or rising.

 

Original article published at www.realestate.com.au/blog   by Charlotte Cossar  7/10/2013

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Investment Advice

Superannuation property fund ISPT invests in Brisbane malls

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Property

On behalf of its ISPT Retail Property Trust (IRAPT), ISPT is buy a 3741sq m property in Springfield and a 4889sq m neighbourhood centre in Ipswich.

Both were growing areas supported by strong residential catchments, said IRAPT fund manager Cameron Gregson.

“Obviously the quality of the anchor tenants in both centres also was a drawcard for IRAPT,” he said.

The Springfield property comprises of a 3200sq m supermarket leased to Woolworths on a 20-year lease, along with eight specialty retail outlets.

The Ipswich centre, located just 2km from the Ipswich CBD, has a 15-year lease commitment from Coles to open a 4200sq m supermarket in June 2017.

The two properties will be developed by Brisbane private property group Citimark, which has $1.5 billion of diversified development book focused on southeast Queensland.

“IRAPT’s decision to acquire both the Silkstone and Springfield retail centres is a huge show of confidence in these projects and the southwest corridor (of Brisbane),” said Citimark’s director of commercial and retail Jonathan King.

McNab Constructions has been appointed to build the Springfield centre, with completion expected in May 2017, while Hutchinson Builder will build the Ipswich Centre.

Sam Hatcher from JLL and Craig O’Donnell from CBRE managed the sale.

 

Originally Published On: http://www.theaustralian.com.au/

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Investment Advice

Low interest rates cuts negative gearing ATO investor claims in 2012-13

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Low interest rates cuts negative gearing ATO investor claims in 2012-13

Low interest rates cuts negative gearing ATO investor claims in 2012-13

Record low interest rates have shown up in new statistics from the Australian Taxation Office, in a sizable drop in negative gearing tax claims by property investors.

Claim for rental properties fell from around $13.8 billion to $12 billion between the 2011-12 and 2012-13 financial years.

The latest statistics for 2012-13 show that 1.26 million people deducted losses made on investments (including mortgage interest) from their overall income, from the 12.7 million lodged individual tax returns.

The overall cost of negatively-geared rental properties has fallen by $2.4 billion, or 31 per cent, in 2012-13, due to record low interest rates and higher rents.

The Tax Office’s latest statistics shows 1.9 million landlords.

The value of rent returned was up 8.6 per cent to $36 billion but the value of interest claimed was down 6.7 per cent to $22 billion.

While the number of landlords with negatively-geared properties increased by almost 60,000, their tax deductions fell 13 per cent.

​The highest number of property investors claiming tax deductions had a taxable income – after tax deductions – of between $37,000 to $80,000 a year.

By JONATHAN CHANCELLOR

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Investment Advice

How investor Nautilus nearly doubled money on property in 18 months

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How investor Nautilus nearly doubled money on property in 18 months
How investor Nautilus nearly doubled money on property in 18 months

Nautilus purchased this complex of 10 industrial buildings at 93 Burnside Road, Yatala, Brisbane, 18 months ago. Photo: Supplied

 

Nautilus Investments Corporation has made a 75 per cent gain on the value of an industrial property in less than 18 months after fully leasing half empty buildings and selling them off to Sydney-based fund manager Ringmer Pacific.

The Melbourne-based Nautilus purchased the complex of 10 industrial buildings at 93 Burnside Road Yatala, south of Brisbane from receivers in mid 2013 for $10 million.

It has now sold the asset for $17.45 million reflecting a yield of 8.94 per cent.

Savills’ Callum Stenson and Myles Clentsmith negotiated the deal following an expressions of interest campaign that attracted over 50 buyer enquiries and five offers to purchase.

“This was about being prepared to take on the risk profile,” Mr Stenson said. “When they first bought they were looking for something high return, high risk.”

“The complex was in disarray when Nautilus bought it. It had 57 per cent vacancy, there was outstanding infrastructure charges and no certificate of completion,” he said.

“At the time there was plenty of money but limited confidence – people were sitting on their hands, but those who stepped up have reaped the benefits.”

NEW TENANTS

Nautilus spent 18 months fixing the issues, securing new tenants and presenting the 14,500 square metres property back to the market fully leased.

A similar strategy is now being actively taken up by commercial real estate groups such as Lend Lease’s Australian Prime Property Fund.

That fund snapped up an empty ­Bunnings Warehouse in Brisbane in July last year for $21.27 million and Hills Limited’s headquarters for $15.6 million which is to be vacated next year.

Sydney-based fund manager Ringmer Pacific, which purchased the Nautilus asset, said the property has a prime location.

Ringmer Pacific’s Giles Austin said: “The 93 Burnside Road property provides extremely flexible accommodation for local businesses that will be able to adapt to changing tenant needs in this key growth corridor linking the Gold Coast and Brisbane.”

by Matthew Cranston

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