{"id":24867,"date":"2022-04-10T11:50:00","date_gmt":"2022-04-10T03:50:00","guid":{"rendered":"https:\/\/www.99.co\/blog\/singapore\/?p=24867"},"modified":"2024-10-25T12:25:41","modified_gmt":"2024-10-25T04:25:41","slug":"property-jargon-of-the-day-rental-yield","status":"publish","type":"post","link":"https:\/\/www.99.co\/singapore\/insider\/property-jargon-of-the-day-rental-yield\/","title":{"rendered":"Rental Yield"},"content":{"rendered":"
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Every day, 99.co picks a piece of property jargon to explain it. Today we look at the rental yield<\/strong>. Here’s how it works:<\/p>\n\n\n\n

Rental yield<\/h2>\n\n\n\n

The rental yield measures how profitably you can rent out your property in relation to what you paid for it. When people talk about rental yield, they can refer to the gross rental yield, or net rental yield.<\/strong><\/p>\n\n\n\n

The gross rental yield is simply the amount of rental income the property generates, versus its purchase price. It doesn’t consider other ongoing expenses, such as mortgage interest, property taxes, and maintenance.<\/p>\n\n\n

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Rental yield measures how profitably you can rent out your property, in relation to what you paid for it<\/figcaption><\/figure><\/div>\n\n\n

To get the gross rental yield, simply divide the annual rental income by the property price; then multiply it by 100. For example, say a property generates S$36,000 per year in rent. The total price of the property is S$1.2 million.<\/p>\n\n\n\n

The gross rental yield is (S$36,000 \/ S$1.2 million) x 100 = 3%<\/p>\n\n\n\n

For net rental yield, we would add the cost of interest, maintenance, property taxes, and so forth. For example, say that the yearly cost of all these taxes and maintenance bills is around S$8,000. Deducted from your annual rental income, you’re only getting (S$36,000 – S$8,000 = S$28,000<\/strong>).<\/p>\n\n\n\n

The net rental yield is hence (S$28,000 \/ S$1.2 million) x 100 = 2.3%<\/p>\n\n\n\n

So what’s a good rental yield?<\/h3>\n\n\n\n

The typical rental yield for a residential property in Singapore (as of 2019) is between 2 to 3%. Most residential properties have a net rental yield of around 2.3%.<\/p>\n\n\n

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This is higher for commercial properties. The net rental yield of most commercial properties is about 3.3%, and the range falls between 3 to 5%.<\/p>\n\n\n\n

Why do two experts end up with two different calculations on net yield?<\/h3>\n\n\n\n

Net rental yield is not always entirely accurate. Remember that some costs aren’t fixed \u2013 for example, the mortgage interest rate on a private property can change all the time. Likewise, maintenance costs can increase over time, as the property ages. Some experts have higher cost estimates than others.<\/p>\n\n\n\n

Also, many properties investors have preferred ways of calculating net rental yield. Some may simply deduct 10% off the rental income to account for potential vacancies or tenancy issues. Others have exact spreadsheets that track the exact cost of such occurrences.<\/p>\n\n\n

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Net rental yield is not always entirely accurate as many property investors have preferred ways of calculating net rental yield.<\/figcaption><\/figure><\/div>\n\n\n

But whatever method you use, it’s best to think of rental yield as a general gauge of a property asset, rather than a super-precise scientific tool.<\/p>\n\n\n\n

Read this: Calculate rental yield in Singapore: A quick and simple guide<\/a><\/i><\/p>\n\n\n\n

How do you increase the rental yield on a property?<\/h2>\n\n\n\n

There are only three real ways to do this. You can lower the costs of the property somehow, jack up rental income, or do both at once.<\/p>\n\n\n\n

For example, you could keep costs low by making sure to:<\/p>\n\n\n\n