Yield is the most basic analyzing tool for any real estate investment. It is also the least useful in informing you of the economic value of the property. However it is a quick and easy way to give you a basic idea of where the property is going.
To calculate the yield, simply total up the income you will receive from the property in a given year, then divide this by the sale price. You will receive the yield in a form of a percentage.
Net Yield (Cash Flow Before Taxes/Investment):
This is a very useful tool in analyzing real estate investments. It gives us a basic look at how much cash we are receiving in any given year verses the amount of cash we initially invest in the building.
First we will have to calculate our cash flow before taxes. This is the gross annual income of the property less the mortgage payments that are made over the course of the year.
Real Revenue Yield:
Similar to Net Yield, except thatyou also consider the mortgage interest and property tax. Substract these two from the cash flow.
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