What is Gross Rental Yield?

What is Gross Rental Yield?

This is a method to evaluate or compare properties quickly.  The Gross rental yield for your rental property is its annual rental income divided by your property’s value/price (multiplied by 100 to get the percentage).  The property’s price is comprised of the purchase price, all closing costs, and any renovation costs.  

Example:  Let’s say our home’s fair market value is $300,00 and needs $20,000 worth or cosmetic repairs to draw maximum rent.  The closing costs would be about $6,000. So our total property value (from an investor’s perspective) would be $326,000.  The rental market for this neighborhood with an improved property of comparable size would be approx. $2,200 per month. (You have 3 rental comps to demonstrate).  So:

2200 x 12 = $26,400

$26,400 / $326,000 = 0.080 x 100 = 8.09 GRY 

AND SO, if the Gross Rental Yield indicated in the buy box was 10 to 11% - then this property would not be submittable to the iBuyer.  The property would need to have rent at $2720 per month in order to reach that 10% gross rental yield. If the comps do not support that rent, again, the property will not solicit an offer from the ibuyer as it does not meet the buy box criteria.

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