What Returns could I make from Property Investment

With an investment property there are 2 distinct sources of measuring Return on Investment (ROI), rental yield and capital growth.

Gross Rental Yield Calculation

Rental Yield

If you have a property worth $500,000, your tenant pays $25,000 per year in rent and you pay $5,000 a year in costs, you have a gross rental yield of 5%, and a net rental yield of 4%.

For example in 2020 RealEstate.com calclulated the average rental yield across 10 Gold Coast suburbs-:

Avg. Rental Yields Gold Coast
Surfers Paradise 3.28%
Miami 4.1%
Jacobs Well 4.59%
Worongary 5.2%
Mt Tamborine 4.61%
Clear Island Waters 4.04%
Arundel 5.13%
Ashmore 5.11%
Broadbeach Waters 3.74%
Mermaid Beach 2.69%

Source: best suburbs to invest in Gold Coast (RealEstate.com.au)

Note COVID 19 has affected these numbers on the Gold Coast. Fox's Real Estate Agents Southport Gold Coast report a serious lack of availability of properties, both for rent and sale.

Capital Growth

Capital Growth is the appreciation (or negative return) of the asset itself expressed as a percentage %.

If say you bought a unit at Main Beach on the Gold Coast for $125,000 in 1991 what would be the price now 2021 (30 years) if you gained a 10% pa Capital Growth on average?

Capital Growth $125,000 30 years
5% $540,242.80
6% $717,936.40
7% $951,531.88
8% $1,257,832.11
9% $1,658,459.81
10% $2,181,175.28

Compare Growth

Which suburbs deliver over the long-term?

You may see a better overall return from a property with a lower rental yield and a higher capital growth.

Price to Income Ratio
Sunshine Coast 4.45
Gold Coast 9.66

Refer Sunshine Coast vs Gold Coast

Commercial Rentals

Check the rental history

Always check to see if rents are not fasely inflated, or there is not a history of arrears. You can check the rental payment register.

With a good tennant and a long-term lease rental returns can be better than the residential market.

Commercial Rental Tips

  • Buy at the right time in the right industry
  • Location - a small regional town may have a higher rental yield and a smaller capital growth over time.
  • Buy an asset that is easy to re-let
  • Research your asset - don't pay too much
  • Commercial properties need a larger deposit - often 30%

Commercial Rental

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