In today’s episode of the Michael Yardney Podcast, I’m joined by independent financial advisor Stuart Wemyss, and we tackle the great debate in property investment - the significance of rental yields versus capital growth.
Stuart's insights, backed by years of experience and knowledge of Australia's property market, guide us through this complex topic.
We uncover what rental yields can reveal about a property's potential, debunk misconceptions about 'blue chip' suburbs, and emphasize the importance of strategic planning and a long-term approach.
Investing in property: understanding rental yields and capital growth
We discuss the relationship between land value and rental yield, as well as the importance of strategic planning and a long-term approach for a successful property investment journey.
As well as….
- The definition of rental yield:
- The gross amount of income that a property will generate as a result of having a permanent tenant, is divided by its current market value, expressed as a percentage of that current market value.
- Drivers of rental yield:
- Proportion of land in building value
- Lower expected capital growth
- Alternate use
- Market value is less than technical value
- Rental yields versus capital growth.
- How the importance of rental yields and capital growth can change depending on an investor's stage in their investment journey.
- The intricate relationship between land value and rental yield.
- The significance of strategic planning and a long-term approach to a successful property investment journey.
- Balancing rental yield with long-term capital growth goals.
- Busting some misconceptions about blue-chip suburbs.
- Emphasising that while rental yield can provide immediate income, it's capital growth that's the true wealth-builder in property investment.
- Providing a fresh perspective on the dynamics of rental yields and capital growth.
Links and Resources:
Stuart’s Book – Rules of the Lending Game & Investopoly
Get the team at Metropole to help build your personal Strategic Property Plan Click here and have a chat with us
Get a bundle of eBooks and reports – www.PodcastBonus.com.au
Some of our favorite quotes from the show:
“So, we haven't liked some of the things that have happened to our markets and to interest rates over the last couple of years, but there's a pattern that's formed that you need perspective of.” – Michael Yardney
“But if it doesn't get you to the end goal in the time frame you want with minimum risk, then extra rent in the short term, especially if it's taxed, isn't going to be the answer to your investment solutions.” – Michael Yardney
“When you say no now, you can always come back and you can say yes later. If you say yes now, it's harder to say no later.” – Michael Yardney
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