What is a rental yield for a person living in Dhaka?
Well, a Rental yield is the percentage of the total amount of money you can earn after renting out your property to someone. Generally speaking, the amount is a yearly calculation, and you need to rent out a property to earn it. If you understand simple math formulas, calculating it will get easier after each try. Knowing the rental yield of a property helps you reach investment goals with precision.
So, how does it work?
Well, the answer is rather simple, and you need to follow some general rules. Today you will learn everything about the rental yield and how to invest in a property with a high rental yield (In Dhaka or any other country).
Types of rental yield for a property owner
If you want to know the full concept of rental yield, first, you need to look at the types: gross rental yield and net rental yield.
Gross rental yield
Gross rental yield, here you are looking at the value or the purchase price of the property. So if you are an investor who owns a property, you might consider the value of that property because it has likely gone up at times. Then again, you are just considering the purchase price, which is equal to the property’s value.
Anyways, to get the gross rental yield, what you are going to do is look at the annual rental income of that property.
Calculate gross rental yield
Here’s how you can calculate gross rental yield without the help of an expert.
- Add up the total amount you got or will have to pay as rent.
- Now, divide the total amount by the current price of the property.
- Finally, multiply the result by a hundred and get the exact gross rental yield.
Note: Annual rent ÷ The value of the property X 100
Here’s an example of calculating gross rental yield
Let’s say you receive $50,000 each year in rent, and the property is worth $500,000. Your gross rental yield is equal to $50,000 ÷ $500,000 X 100 = 10%.
Net rental yield, and why is it different?
No. Not at all. In the case of net rental yield, first, you need to just delete the annual expenses from the total rent.
The formula is, (Annual rent – Expenses) ÷ The value of the property X 100
Let, the price of the property is $500,000. If the property receives rent of $50,000 each year, total repairs and taxes are yearly $20000, and you need to duct the expenses first.
Therefore, the net rental yield stands, $(50,000 – 20000) ÷ $500,000 X 100 = 6%.
How to choose a property with a high rental yield
Choosing a property with a high rental yield in Dhaka is actually easy. First, you need to go through the rent history of an area. Nowadays, you will get the highest rent in Uttara, Banani, Gulshan, Mirpur, and locations where the hospitals are near. Try finding a place near the main road, as people tend to pay more near it. After that, you need to keep the expenses like taxes, bills, and the repair cost in check. A low expense rate will increase the net rental yield on the property.
Finally, you should take the price into consideration. If the price of our property is too high, reaching your investment goal will get tough on you. So, don’t break the bank and place your ‘X’ and ‘Y’ properly while choosing a property with a high rental yield.
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