In This Post:
What is Rental Yield in Real Estate
How to Calculate Rental Yield
What is a Good Rental Yield
Projects with Good Rental Yields
Rental Costs to Cover
The profitability of a real estate investment opportunity is gauged by two extremely essential factors: the Return on Investment (ROI) and its rental yield. We have already given you a detailed explanation of the concept of ROI in real estate and its calculation in our recent post, this time around we are going to explain to you the phenomenon of rental yield.
Zameen.com is bringing you all these educational blogs to help you develop a better understanding of the realm of real estate investing. So, let’s begin by taking a look at the definition of rental yield and how it impacts the long-term sustainability of property investment.
What is Rental Yield and Why It Matters?
The return on real estate investment generated in the form of rental income is known as rental yield. Like ROI, it is also represented in percentage and is calculated on a yearly basis. Good rental returns hold great importance when it comes to real estate investing.
Your rental income should be enough to cover unforeseen expenses, which are more commonly known as budget buster and are associated with the maintenance and taxation on your owned property. This is why the long-term sustainability of a particular investment opportunity greatly relies on the potential of its annual rental income.
How to Calculate Rental Yield?
The formula for calculating rental yield is very simple. All you have to do is to take the annual rental income generated from your property and divide it by the total amount you have invested in it.
Your total investment may also include expenses, especially if you have paid any mortgage or leasing fee. The cost of a particular investment opportunity increases when you buy it on loan with certain payment terms.
On a side note, if you are planning to build your own house, these commercial banks provide home loan facilities in Pakistan.
What is a Good Rental Yield?
As per the common market practices of today’s world, a good rental is anything equals to or above 7%. It may help you maintain cash flow and keeps you afloat, despite tackling budget busters.
So, if you are interested in real estate investing, search for areas that offer promising capital gains and rental yields down the road. As an investor, you need to develop a capital growth-focused strategy.
You can even get in touch with the industry experts by calling Zameen.com’s 24/7 helpline. Moreover, with the help of the Real Estate Market Trends and Price Index sections of Zameen.com, you can take your property search to the next level.
Generally, it has been observed that investment opportunities near the city center have more potential to translate into a good rental yield in comparison to properties found in the outskirts of the metro area. This is mainly because of their well-connected location.
Explore Projects By Zameen Developments for Good Rental Yields and Rewarding Investment Outcomes
All of the projects that have been announced by Zameen Developments including Zameen Aurum, Zameen Ace Mall, Zameen Ace Homes, Mall 35, and Zameen Opal offer good rental yields. Such successful ventures have helped Zameen Developments reach new heights over the past couple of years.
Common Rental Property Expenses
There are some inevitable costs associated with rental real estate investment. However, the amount and intensity of the expenses may vary from property to property and your rental income should be enough to cover them.
These may include all expected and unexpected costs such as insurance costs, property management fees, and maintenance costs (budget busters) as well as finances related to legalities and taxation. All such rental property expenses may fluctuate from time to time.
This was everything you needed to know about rental yield and how it can help you gauge the profitability and sustainability of your desired property investment opportunity. We hope this piece has provided you with all the useful information. If you still have any questions or feedback related to our blog, write to us at blog@zameen.com.
On a side note, we have also covered a detailed guide on the basics of real estate investing that may interest you. You may also like reading about the top 10 rules for making a successful property investment and the roles and responsibilities of a landlord.
To read more interesting property investment guides and project-related posts, keep following Zameen Blog, Pakistan’s No.1 real estate blog and don’t forget to subscribe to our email newsletter.
