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What rental yields are you looking for?

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Cat | 18 Feb 2016, 08:05 AM Agree 0

We built a unit complex in Queensland (between Brisbane and Gold Coast) almost 12 months ago, we've had it on the market however we only seem to get investors looking for an absolute bargain. Our asking price offers a rental yield of 5.2-5.4% with low vacancy rate in the area we offered 5 units on the rental market and they were snapped up within 2 weeks by quality tenants. The tenants have all signed on for longer leases with yearly rental increases (most asked for 2 years +), we know we have a good product the issue is we keep getting enquiries where people are wanting a rental yield of 8% or net yield of 5%. The enquiries we get conflict with the RP data information that says average yield in Australia is 3.5% with it varying across the states but we are still well ahead of average rental yield in Brisbane. I feel our asking price is fair given the rental yield and as it is less than 12 months old the depreciation benefits are significant.

In my opinion the risk is low due to our tenants wanting to stay long term and the current rental market in the area, the location means it is not subject to risks of a mining town which anyone would expect a high yield from because of the increased risk. I'm confident of capital growth due to the location with significant local infrastructure investment by the local government and the ease of access to Brisbane, Gold Coast & Ipswich. I think our main issue is there is no direct comparison sales for our product in the area so it is compared to inferior products that are much older and require renovation/repairs, that doesn't have the air con, double garage, 2 bathroom etc.

So I guess my question is. What yields are you looking for? How do you research the local market? Why do you think one area is better than another for capital growth?

We would like to understand our customers and market better as once we sell these we are moving onto our next project, the problem is we can't start until these are sold.

Any information/help would be greatly appreciated.
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