The rate of return provides a rough indication of the comparison of rental income with the value of the property, which is the gross rate of return before any related expenses have been taken into account. The gross yield provides a simple comparison between different value assets and rental income, while the net rate of return includes the investment cost, which is the percentage of the investment’s return after deducting expenses and the value of the property.

The return on real estate investment generally has the following three calculation methods:

1. Income model calculation
Return on Investment = (Monthly Rental Income – Mortgage Month Contribution)*12/(First Phase Payment + Mortgage Period in the Out-of-House Period)
Under this model, investment income is used to purchase commercial real estate through loans, then rent out to obtain funds, and repay bank loans at monthly rents. The excess is the return on investment.
2. Calculation of return on investment
Return on investment = (monthly after-tax rent – property management fee) * 12/ purchase of housing unit price
This approach considers the relationship between rent and house prices, as long as the result is greater than 8% is a good investment. Since the time value of money is not considered, it is only a rough algorithm.
3. Calculation of investment recovery time
Years of investment recovery = (primary mortgage + mortgage payment during the period of renewal) / (monthly after-tax rent – mortgage monthly contribution) *12
This method can simply calculate the length of the fund recovery period, which is generally considered a reasonable investment within 12 to 15 years.

Through the above three different methods of calculating the return on real estate investment, we can clearly calculate the Australian housing investment return rate situation. According to statistics, the annual stable rent return of Australian real estate is around 5%, and the average annual real estate value increases by 10%, almost doubling every 7 years. Regardless of the method used, Australian real estate investment returns are considerable, which is also an important reason that attracts a lot of investment attention and Australian housing is getting hotter and hotter.

Of course, there are other aspects that can measure the value of real estate investment, including land appreciation potential, the possibility of future infrastructure construction, special landscapes such as seascapes, and whether or not future retirement considerations will be taken into account.

For many people, when they embark on the road to real estate investment, a home with multiple earning prospects is a dream house. High yield is one of the most important factors, but it also needs significant capital growth potential, stable rental returns, and sustained low-level cash spending. The challenge for new investors is to try to rush ahead of other smart buyers because such investment properties are very popular in the market.

Usually, in Sydney, for example, apartments tend to have better yields than private houses. However, the gross yield on Sydney’s rents fell to the lowest point in the third quarter of 2017, setting a record of 3.12% for independent houses and 3.86% for apartments. The gap between the rental income of Sydney’s independent houses and apartments is now 0.73%, the fifth highest level since records.

If you want to chase higher rental returns, you may consider investing in other Australian cities. In Melbourne and Canberra, for example, in the third quarter of 2017, the rate of increase in the yields of apartments in these two cities was close to the highest, reaching 5.77%.

Tip: Investing in real estate may require large amounts of cash, from ongoing expenses to unpredictable maintenance costs. Investing newbies Don’t underestimate costs, including transaction fees (stamps and legal fees), vacant house expenses (advertisement and no-rental-period fees), maintenance, administrative expenses, insurance, real estate management fees, and municipal fees.