Yield in Property Investment
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A brief explanation
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For residential development it is the sum
of all the sales of the units, and the
investment value of the income from rental
units
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For commercial or rented property
INVESTMENT VALUE = INCOME x YIELD
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Yield is the return an investor wants on its
money. If the investment is risky, they will
want a higher return, which gives a shorter
pay back period
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Rent is the annual return. This means that
the higher the level of return required, the
lower the investment value!
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Rent relies on market demand, Say it is
£10,000 a year
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If the investor wants a 12.5 % return
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Rent = 12.5% of money the investor is
prepared to spend – i.e. how much the
development is worth to them
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If £10,000 =12.5% then Value =
£80,000
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If the investor only wanted 10%, Value =
£100,000
Yield calculation in property investment involves determining the returns investors seek on their money. For residential development, it encompasses sales of units and income from rentals. Commercial properties value is determined by income multiplied by yield, reflecting investor risk appetite.
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Presentation Transcript
Yield A brief explanation www.pas.gov.uk
How is value calculated? For residential development it is the sum of all the sales of the units, and the investment value of the income from rental units For commercial or rented property INVESTMENT VALUE = INCOME x YIELD
What is yield? Yield is the return an investor wants on its money. If the investment is risky, they will want a higher return, which gives a shorter pay back period Rent is the annual return. This means that the higher the level of return required, the lower the investment value!
How does that work? Rent relies on market demand, Say it is 10,000 a year If the investor wants a 12.5 % return Rent = 12.5% of money the investor is prepared to spend i.e. how much the development is worth to them If 10,000 =12.5% then Value = 80,000 If the investor only wanted 10%, Value = 100,000
