Are you curious about how your property portfolio is performing?
We are too. So we messed around with the data and what we saw, surprised us.
The market’s average gross yield for properties is below 4%.
Below 4% gross yield? What does this mean for all of us?
It means, the gross cashflow generated over a year divided by the value of the property is 4%.
Yield = (total rental income) / (property value)
Yes, gross. Not net cashflow.
Compare this gross yield to the interest rates that the bank is charging below.
Mostly at 4.5-4.75%.
In short, we may be in a negative net yield position right now. Cashflow we received from rental is LESS than the interest rate payment we pay banks every month. In short, we are subsidizing our tenants.
Ok, fine. You may argue that you bought the property a long time ago, therefore, the rental payment covers monthly installment. Well that’s great! Congratulations.
But if you have to decide today if you want to buy or rent, as a general rule now (as of Nov 2018), it is cheaper to rent than to own.