Should you be investing for Capital Growth or Yield? Which is better? In this episode, Dan and Sam break it down so you can make up your own mind to help you reach your financial goals.
Below are the calculations they use to determine yield and growth:
Gross Yield:
Purchase price = £100,000
Annual rental income = £5,000
5,000 / 100,000 = 0.05 x 100 = 5%
Net Yield:
Purchase price = £100,000
Annual rental income = £5,000
Property expenses = £3,500Profit = £1,500 (Rental income minus expenses)
1,500 / 100,000 = 0.015 x 100 = 1.5%
Growth:
Purchase price = £100,000
Price Growth = 5%
100,000 x 1.05 = £105,000
To compound, multiply again by growth rate - eg 5%
105,000 x 1.05 = £110,250
110,250 x 1.05 = £115,762.50
115,762.50 x 1.05 = £121,550.63
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