A rental estimate is the start of the research

Ask where the estimate comes from

Look for recent comparable rentals, including property condition, location and features. An advertised estimate is not a guarantee of achieved rent or uninterrupted occupancy.

Know which yield you are reading

Gross yield generally compares annual rent with a property price or value before expenses. Different presentations may use different inputs, so check the definition before comparing figures.

Build an ownership cost picture

Rates, insurance, management, repairs, strata costs where relevant and vacancy can affect the money available. Finance and tax considerations add further complexity and depend on the circumstances.

Use more than one measure

Yield does not establish building quality, future capital growth, local demand or suitability for your finances. Treat it as one input into a broader assessment and check the evidence behind each assumption.

Gross yield is only one view

For an illustrative property price of $650,000 and rent of $600 a week, 52 weeks of rent would total $31,200. Dividing that annual rent by the price gives a gross yield of 4.8%. This assumes a full year of rent and does not subtract expenses. It is not a forecast of the return a particular property will achieve.

Vacancies, management fees, insurance, rates, maintenance and strata costs can change the picture. Interest and other financing costs then affect the money coming in and going out of your household. A higher advertised yield should prompt a closer look at the assumptions and risks. Keep the gross calculation, ownership cost estimate and financing assessment separate so each is easier to understand.