How to use Residz to find high yield rental investment properties

Looking at rental yields is a good start to judge if a property is potentially undervalued, and a good investment or not

Residz Team 5/5/2022 11:31:29 AM 3 min read

In this article I’m going to tell you the highest yield rental suburbs in Australia. I’m also going to mention the terms:

Capital growth or gain ( (ie. how much a property’s value is increasing)
Detached housing (ie. a house rather than an apartment or unit)
Gross rental yields (ie. your annual rental income divided by your property’s value, expressed as a percentage. The value could be the purchase price or current market value).
Net rental yields (ie. as above for gross, except with expenses like repairs, insurance, property management fees deducted from the rental income before calculating)

Rents are rising rapidly

Recent data shows across Australia unit rents are rising faster than capital growth and they are also rising faster than detached housing rents (CoreLogic). So, this makes it a good time to talk about rental yields and how you can use them plus Residz Investability Tool and address search tool to find a quality investment property, whether it be a unit or a house.

Dry stuff but important

This confusing subject is not as much fun as planning your redecoration efforts, I know. But, understanding rental yields is what clever investors do, so you gotta get jiggy with it.

How to calculate gross rental yield, according to loans.com.au:

Add up your rental income for the year to get your total annual rent (weekly rental income x 52).
Divide your annual rent by the value of your property.
Multiply that figure by 100 to show your gross yield as a percentage.

If you made $38,000 in annual rental income and your property is worth $680,000 you have a 5.6% rental yield.

Higher yield gives clues

Banks are excellent at making money and if they say rental yields are an important part of your investment strategy, it’s worth looking at them.

“If [a property’s] gross rental yield potential is likely to be below, say, 4%, there's a chance it might be overvalued for investment purposes,” says CommBank’s website. “Conversely, if the gross yield is over 5.5% – and the rent is sustainable over the longer term – the investment property may be undervalued.”

Great investment? You be the judge

Okay, so looking at rental yields is a good start to judge if a property is potentially undervalued, and a good investment or not. You will also want to take into account:

‘Location, location, location’ (always said 3 times for emphasis) so you attract tenants and get capital gain.
The appeal of the property, so you compete well with other properties up for lease nearby.
Residz investability index’s score for the suburb - which helps to understand historic demand for the area and local demographics.
Population projections and other information to suggest future demand for the area. For example, I know one investor who follows Stockland shopping centre developments. If they are building, she buys nearby.

Australia’s highest rental yield suburbs

According to Smart Property Investment, Kambalda East in WA leads the pack with a rental yield of 12.24%. Also in WA, Bulgarra (10.4%), Kambalda West (10.04%), Boulder (9.59%), and Newman (9.16%).

In Qld, Pioneer is the suburb with the highest rental yield of 11.84%, followed by Dysart (10.76%), Blackwater (10.74%), Depot Hill (10.24%), and Moura (9.71%).

In South Australia, it’s Port Pirie West (10.87%), Victor Harbor (9.92%), Port Augusta (9.43%), Quorn (9.14%), Middleton (9.14%).

In NSW, Sussex Inlet in NSW has a high rental yield of 9.66%. Other high yield areas in NSW are Warren (9.6%), Broken Hill (9.24%), Peak Hill (8.72%) and Moree (8.25%).

In ACT, Denman Prospect is 9.46%, followed by Taylor (7.71%), Curtin (6.8%), Hackett (6.73%) and Crace (6.5%).

In Tasmania, Queenstown has a high rental yield of 8.33%, followed by Zeehan (7.43%), Strahan (6.74%), East Launceston (6.22%), and East Devonport (6.15%)

In Victoria, Murtoa returns 7.71%, Donald (7.35%), Warracknabeel (7.22%), Nhill (6.91%), and Aararat (6.45%).

Choosing wisely to win

Finding the right investment property is a combination of deciding where you want to invest (try putting suburb names into the Residz search tool and scrolling around for fun), how much money you have, picking the right timing, and deciding how long you want to own your investment property. Given your tenants will help pay off your investment, make a habit of looking at rental yields too!

Image: For rent sign, Nick Youngson, Alpha Stock Images - http://alphastockimages.com/