What Is a Good Rental Yield on a Queensland House and Land Package?

Rental yield is the simplest way to compare one investment property against another, and the easiest number to be misled by. Here is how to work it out properly and what to check before you buy on yield alone.

How rental yield is calculated

Gross yield is the annual rent divided by the purchase price, expressed as a percentage. If a package costs $700,000 and appraises at $550 a week, that is $28,600 a year, which is a gross yield of about 4.1 per cent. Swap the numbers for your own package and the same sum answers the question.

Net yield is the number that matters

Gross yield is a shortlisting tool. Net yield is what the property actually earns after costs:

• Property management fees, usually a percentage of rent plus letting and statement fees
• Council rates and water charges
• Landlord and building insurance
• Repairs, maintenance and a realistic vacancy allowance
• Body corporate fees, where the property is a townhouse or unit
• Land tax, if your holdings reach the threshold in Queensland

Take those off the annual rent before you divide by price. The gap between gross and net is often larger than buyers expect.

Why new packages can show a higher gross yield

New releases in growth corridors usually carry lower land values than established coastal suburbs, and rent is set by the home rather than the postcode. That combination tends to produce a higher gross yield. The trade is capital growth, which is generally slower in areas where land is still being released.

New homes also carry depreciation benefits on the building itself, which a quantity surveyor can schedule for your accountant. That is an after tax benefit, not extra rent, so treat it as a bonus rather than a reason to buy.

What to check before you buy for the yield

• An independent rental appraisal from a local property manager, not the figure on the flyer
• Comparable rents for the same style of home in the same estate, not just the same suburb
• Vacancy rates and how much new supply is coming to the area
• Whether the design appeals to tenants: bedroom count, car spaces, air conditioning, fenced yard, storage
• Which bills the tenant pays, particularly water and garden care
• Whether the rent covers the loan once the build is complete

Where yield and growth pull against each other

Higher yield usually means a lower price point and a longer commute. Lower yield usually means a blue chip suburb with limited supply. Neither is right on its own. Decide what the property is for, income now or growth over time, and buy for that purpose.

Frequently asked questions

What is a good rental yield in South East Queensland?

It varies by suburb and property type, and it moves with the market. Instead of chasing a headline number, compare the packages you are considering on the same basis, net of costs, and test whether the rent covers the loan.

Is gross yield or net yield more important?

Net yield, because it is what reaches your account. Gross yield is useful for shortlisting, and lenders look at net rent when they assess the income from the property.

Do house and land packages rent well?

New homes in established growth corridors generally see strong tenant demand, because the fit out is new, maintenance is low and the build is under warranty. Confirm it with the property manager who knows that estate.

Can rent help me borrow more?

Rental income can support a loan application, often at a discounted share of the rent. Ask for the loan to be assessed with the appraisal included rather than added afterwards.

Where to start

Every listing on our investment packages page shows the price you would be calculating from. When one looks right, send us an enquiry and we will arrange an independent rental appraisal and a finance check through Sorted Mortgages at the same time.