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  • Property Yields

    Calculate Net Yield

    Hi all. To calculate the net yield do you include refurb costs too? Thank you

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    there are so many ways to calculate yields that you need to be careful. If it was me then yes refurb costs are part of your investment base (not a rental cost) but I’ve seen others just look for developers profits first and then calculate rental yields from a market investment value. Theoretically you need to adjust for cost of capital and leverage risk too - but that’s far too complex for most property transactions.

    The truth is it doesn’t matter what the yield calculation is. The key is that you understand it and can assess what it means. Whatever the calculation the principle that you need a bigger yield (or return) to take more risk remains. So if you can assess risk and understand your return then the yield however calculated just aggregates into an easily understood number.
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    Chartered Accountant, Tax Advisor and Mortgage broker

    (and BTL portfolio owner)

    stuart@johnsonsca.com

    02039077022


    I think you could turn this around a little

    what do you think is a fair profit for the money you have injected into a project

    The think I have learned from PTs is every one is different

    we all have a thought on this its very different for every landlord

    some invest for yield some invest for yield and capital growth


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    Learn Change and Adapt ?????

    All comments are for casual information purposes only. If you wish to rely on any advice I have given please ensure you obtain independent specialist advice from a third party. No liability is accepted for comments made.

    My view is that yield is based on the property value (on the capital side of the equation) rather than the cash you put into it.  Hence for me, initial refurb costs would not be part of a net yield calculation.  Regular maintenance and upkeep costs would be a reduction to the income part of the calculation though.  My attempt to define gross and net yield are here (including example calculations) if you're curious.

    If you're wanting a figure that does reflect refurb costs, for example to compare properties that require different levels of work and hence cash input, I'd suggest looking at Return on Investment (ROI) - that link goes to my definition and example calculations.

    Whatever calculation you decide best suits your situation though, I think the most important thing is to understand what it means to you and then apply it consistently to get fair comparisons.

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    Form a personal perspective i am analysing return versus return potential on other investments. In my case i would take yield based on every penny put in, that includes cost to view,  fees etc. I do this as the alternative deployment of capital would be into for example a bank or stock, where I would base the yield on every penny in.


    Just my way.  As an aside  the  best investment to date I eve made was my own time learnng Excel. Im a total slave to it now for this kind of stuff.






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