What is a good rent yield for investment properties in Canberra?

arescarti42 said :

According to APM, the gross rental yield on houses in Canberra is currently 4.67%, and the gross yield on units is 5.36%. Relative to other Australian capitals, the yield on houses is lower than most others, and the yield on units is roughly the same. Of course it’s considerably less than that once you include maintenance, land tax, rates, insurance, body corporate fees, management fees etc.

Makes the ~4-5% risk-less return you can get on term deposits look pretty good IMO.

Its easier to convince people property is always good value because its a physical thing. when its just like shares and cash and should be bought as part of some kind of plan.

I have a friend who was shocked to think I was putting money into a managed fund rather than paying off my house. Yet i’ve done the figures and the return on the managed fund right now is worth more than the savings on my interest. But that is only because the mortgage is lower than average and I have some money in the managed fund, however many people just do what they hear from someone else without doing some basic figures.

I even had to show a mortgage broker from Citibank once that their maths/assumptions were way off and they were trying to con me into switching loans, however many would look at it and switch on the spot.

Don’t forget to factor Land Tax into your equations – I know of someone with a place in Turner who was better off leaving their place empty rather than renting it out and paying Land Tax to the Canberra City Council.

tommy said :

Most recent which is free http://apm.com.au/MarketReports.aspx

SQM also produce their own time series of implied gross rental yields.

I would wait for the ‘blood in the water’ before I went purchasing in this city again.

Int rates at all time lows, property prices at all time highs.
rent on its way down… for well over 7 months now….

Body corp fees on the most basic new units are $1800 – $2500. Anything with a lift, pool, gym or facility linked to shops etc will make those costs double if not triple.
Inner city and kingston units, 2 bedroom, pool in development, gym etc $4000 – 5000 body corp per annum.
10% agent fees and all the other associated rubbish you have to pay to keep a property.

I am super pro property… please don’t get me wrong, but it is in agents and those associated interest to push how great the market is and how untouchable canberra is. Bollocks.

This city is just as venerable as any other in the world. In fact we are more susceptible to dramatic change as we have such a large public service sector.

Nothing can protect an individual who has borrowed 95% is borderline cash poor but household asset rich from the inevitable rise in interest rates and the very sharp pain of every increasing shortfall in monthly payments that they will need to make up for when that happens.

when… and no one in their right mind can deny that this will not happen… when the cash rate comes up again probably in the coming 2 – 3 years and is 6% or 8% it will effectively be triple what the cash rate is now, and with banks needing to make money you will be paying well over 10%, loans were only 8,9 and 10% a few years ago people…. have we memories like fish??

Other comments seem to refer to a 4 and 5% return…… this is not an amazing investment, sorry.

You need to be able to keep hold of it for the long term.

Do your math on a repayment that is double what your paying now and see if that investment property looks good still.

interest is by far the biggest killer for most ‘run of the mill’ investors. If you can’t absorb a shortfall on a 10% interest rate, on both your own home…. and your new purchase then you are playing with fire, in my humble opinion.

foobooz said :

arescarti42 said :

According to APM, the gross rental yield on houses in Canberra is currently 4.67%, and the gross yield on units is 5.36%. Relative to other Australian capitals, the yield on houses is lower than most others, and the yield on units is roughly the same. Of course it’s considerably less than that once you include maintenance, land tax, rates, insurance, body corporate fees, management fees etc.

Makes the ~4-5% risk-less return you can get on term deposits look pretty good IMO.

hello,

have you got a link to this report? Would be interesting to have a read.

Most recent which is free http://apm.com.au/MarketReports.aspx

Every quarter you’ll be stung by land tax based on the Average Unimproved Value of your property.

So if you have a property with an AUV of $400 000, you can subtract $1800 for rates and $4330 land tax per annum from your rental income. Then, as Arescarti points out, you get to subtract all the other costs too like maintenance, insurance, management fees etc.

Then you have to actually have tenants paying you rent, and if you have bad tenants, more fun.

foobooz said :

arescarti42 said :

According to APM, the gross rental yield on houses in Canberra is currently 4.67%, and the gross yield on units is 5.36%. Relative to other Australian capitals, the yield on houses is lower than most others, and the yield on units is roughly the same. Of course it’s considerably less than that once you include maintenance, land tax, rates, insurance, body corporate fees, management fees etc.

Makes the ~4-5% risk-less return you can get on term deposits look pretty good IMO.

hello,

have you got a link to this report? Would be interesting to have a read.

It’s called the APM Rental Report, here’s the report for the September quarter (I don’t think they’ve put the December report up yet).

arescarti42 said :

According to APM, the gross rental yield on houses in Canberra is currently 4.67%, and the gross yield on units is 5.36%. Relative to other Australian capitals, the yield on houses is lower than most others, and the yield on units is roughly the same. Of course it’s considerably less than that once you include maintenance, land tax, rates, insurance, body corporate fees, management fees etc.

Makes the ~4-5% risk-less return you can get on term deposits look pretty good IMO.

hello,

have you got a link to this report? Would be interesting to have a read.

From what I’ve seen on the Canberra rental market, unless you are willing to put in more than 20% capital yourself, you will almost certainly be negatively geared as the rent will not cover the interest, property manager fees, land tax, rates, insurance, depreciation and other expenses.

According to APM, the gross rental yield on houses in Canberra is currently 4.67%, and the gross yield on units is 5.36%. Relative to other Australian capitals, the yield on houses is lower than most others, and the yield on units is roughly the same. Of course it’s considerably less than that once you include maintenance, land tax, rates, insurance, body corporate fees, management fees etc.

Makes the ~4-5% risk-less return you can get on term deposits look pretty good IMO.