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YIELD
The net annual income of a property in relation to an investor’s initial down payment equals the yield. The yield is a ratio of the gross scheduled income to the purchase price. The yield of an investment property is usually easy to get because the rents and purchase price are usually readily known. However, the yield is not a very good measure of determining if a property is a good investment because it doesn’t take into consideration expenses or debt service.
Calculation
Yield = GSI / Purchase Price
Example
In this example, the gross scheduled income is assumed to be $25,200. The purchase price was $450,000.
Yield = $25,200 / $450,000
Yield = 5%