podcast

Mistakes investors make when looking at rental yields

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Nick Viner - Buyers Domain

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Investors who are too focused on high-yielding properties could be limiting their long-term profit potential.

Inner city investors give too much weight to the importance of rental yield at the expense of chasing good capital growth. Remember that with property, you're really only going to get the big bucks if you lock in good capital growth. Rental yields in the long run isn't so much of a consideration. So what you really want to find is a property that's got a reasonable rental return, because of course you want to pay the bills as you go along the way, but a property that offers good prospects for capital growth. An example of what not to buy perhaps would be something like a small studio on a major arterial road. Now it may be yielding in excess of 5% per annum but your capital growth is probably not going to blow you away. Conversely, a really popular two bedroom unit that ticks everybody's boxes because it's got a balcony, a lock up garage, it's in a small boutique block, it's within 5 - 10 kms of the CBD. That's something that's probably got a lot more universal appeal and therefore better capital growth potential.

Listen to other instalments of The Smart Property Investment Show:
Episode 73: Bad builders: how this investor bounced back
Episode 72: Policy changes to interest-only loans: what buyers need to know
Episode 71: How this 'stubborn' investor recognised a property lemon
Episode 70: How this investor complements each property and balances his portfolio
Episode 69: Are you a ‘lazy’ investor? Consider the benefits to working with a financial team
Episode 68: Special episode: audience discussion live from the Property Buyer Expo
Episode 67: Don’t get ‘caught up in the now’: an expert reveals his tips for success
Episode 66: Wealth distribution: how should you manage your money?
Episode 65: Real estate agents: what separates the good from the bad?
Episode 64: How this investor learned from a property blunder
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