Check Rental Yield For Fancy Suburbs

Writing a piece for the website Your Investment Property, John Hilton talks about investment-worthy suburbs and why capital growth is not bound to come with a growth in rental value.

What’s the rental yield for your fancy suburb?

There are many suburbs, asserts Hilton, which proclaim they have been doing well and the prices are rising but if you research well enough, you may find that such properties display poor rental figures nonetheless. So do you still go for them?

Negative cash flow

I think not. Unless you are a “capital gains” person who wouldn’t mind negative cash flow because you have enough in your kitty to keep paying mortgage out of your pocket! Remember, these are properties wherein the rent you fetch will be well below your mortgage and you can’t ask for a higher rent because that is likely to throw you off the “upper rent ceiling” of the local market.

Hilton also advises that these over-advertised suburbs come with a big price tag and swimming for these can be a monetarily vain exercise for investors. It is always good to remember where you stand and just how much you can spend without compromising your peaceful sleep.

Hilton advises to look for higher rental yield, appreciable but logical prices, and proximity of schools and hospitals, while seeking your prospective property.

You can read the original article here.

Television shows are replete with exhibitions of fancy properties. These are the perceived ‘hotspots’ of present day. But are they? A high-end sticker does not guarantee an investor-friendly property. I know that many investors like playing with the idea of negative gearing and they do not mind low rental yield and negative cash flow till it satisfies their thirst for capital gains.

Investor spectrum is bipolar

But, the investor spectrum is not unipolar. On the other side, there are many others who hate to pay out of their pockets and such fancy properties, for all they may stand for, may expose them to a situation where they pay mortgage out of their own pocket. And the next thing you know, the prices also begin to come down because they were floating a lot above their intrinsic values!

Have you ever been duped by TV show- inflated suburbs?