What is Yield?
Yield is a key metric used by real estate investors to evaluate the return on investment of a property. Typically expressed as a percentage, yield is the amount of income generated by a property relative to its market value or purchase price.
Why is this term important?
Yield is an important factor property investors consider when evaluating the potential return on a property. A higher yield generally indicates a more attractive investment opportunity. However, investors should also consider outside factors such as location, market conditions, and potential for future growth.
Here is an example:
For example, let’s say a property generates $50,000 in net operating income per year. This is the income generated by the property, minus operating expenses such as maintenance, property taxes, and insurance.
The property’s market value is $1,000,000, so its yield would be 5% ($50,000/$1,000,000).