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Calculation of gross yield

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  • 12-07-2020 11:36am
    #1
    Daddy Ireland
    Registered Users Posts: 52 ✭✭


    If a house costs 170k and there are 6k associated legal costs and the potential rent is 15k gross is the gross yield looked on as a gross cost of 170k or 176k. I ask as when I see people quote the gross yield as say 10% are they just looking at the house purchase price ?


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    #2
    Henry Ford III
    Moderators, Business & Finance Moderators Posts: 17,619 Mod ✭✭✭✭Henry Ford III


    €170k.


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    #3
    Daddy Ireland
    Registered Users Posts: 52 ✭✭Daddy Ireland


    Thanks. But why is it not the total cost of 176k ? After all it cost 176k not 170k ?


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    #4
    Daddy Ireland
    Registered Users Posts: 52 ✭✭Daddy Ireland


    Also can anyone help me with gross and net rental yield on following figures in year 1.
    Purchase Cost 170k.
    Legal Costs 6k.
    Kit out costs 2.5k.
    Insurance 500.
    PRTB 90.
    Repairs 1k.
    Wi fi and refuse 550.
    Accountancy tax return 300.
    Mortgage Interest 4k.
    Taxes approx 3.5k
    Rental Income 17k.
    Do the yields look good ?
    Thanks in advance for any help.


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    #5
    Claw Hammer
    Registered Users Posts: 6,160 ✭✭✭Claw Hammer


    Not bad, but I wouldn't go into the PRTB.


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    #6
    Daddy Ireland
    Registered Users Posts: 52 ✭✭Daddy Ireland


    What do you mean Claw Hammer. Your reply is very vague. What's not bad specifically ? The PRTB is a legal requirement ?


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    #7
    Baby01032012
    Registered Users Posts: 1,622 ✭✭✭Baby01032012


    He means don’t do a normal resi let as you will give up complete ownership of your property to someone who potential will stop paying rent over hold and thrash the place and it is a very long and expensive process to get someone out which you receive no support from the rtb and ultimately have to go to the high court. On the positive side if you get a decent tenant you can get your place back in six years as that is the current length a tenant of 6 months can stay.


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    #8
    Baby01032012
    Registered Users Posts: 1,622 ✭✭✭Baby01032012


    Daddy Ireland wrote: »
    Also can anyone help me with gross and net rental yield on following figures in year 1.
    Purchase Cost 170k.
    Legal Costs 6k.
    Kit out costs 2.5k.
    Insurance 500.
    PRTB 90.
    Repairs 1k.
    Wi fi and refuse 550.
    Accountancy tax return 300.
    Mortgage Interest 4k.
    Taxes approx 3.5k
    Rental Income 17k.
    Do the yields look good ?
    Thanks in advance for any help.

    Why WiFi and refuse these are normal expense of the tenants?
    Why have you applied a 33% tax rate, seems quiet low unless you are on low pay and your rental income isn’t all being taxed at the higher rate, usc and prsi.
    As to whether it is a good buy depends on why you’re buying it, have you future plan to use it for children going to college? As a straight investment it would not be great, high risk single investment, buying at height of the market so little short to medium term capital appreciation.
    We don’t know where located size or type of house, condition, whether it meets local council housing standards etc.


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    #9
    Daddy Ireland
    Registered Users Posts: 52 ✭✭Daddy Ireland


    We would just pay wi fi and refuse as a gesture.
    Low income couple earning 54k gross so rent of 17k less allowables equals approx 3k taxes at 20% lower rate plus prsi and usc. i.e just snwaking in under 70k income threshold for 20% rate. 3 bed house in very strong student rental area. Borrow 60% of cost over 10 years. I will be 70 then and spouse 67 and clear of mortgage rental would be welcome income at that point and adult children could take care of letting at that point if not before. Ultimately its for passing on to our now early to mid 20's children. We would probably be in a position by then to gift them each some income once the mortgage is cleared. Any more thoughts would be appreciated.


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    #10
    Daddy Ireland
    Registered Users Posts: 52 ✭✭Daddy Ireland


    Sorry, meant rent of 15k in last post and not 17k.


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