What is a yield?

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 – such as land banking, infrastructure potential or lifestyle reasons – most are mainly concerned with its current return and potential 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 cost or market value. It has nothing to do with a capital gain on a property.

A yield is only based on income, whereas a return includes capital growth. Find out the numbers and timeframes for both before making any decisions on whether the property you are looking at is a good investment.

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