is remaining lease important for rental yield calculation?

[hopeful]

Hi, does anybody actually consider remaining lease in determining rental yield?

I was looking at some properties in commercialguru.

Some of the property leases are like 20 years left.

SO lets say, property is worth $1 million, the lease per year is $50,000 per year or $4167 per month.
If can get gross rental yield of 8%, so gross rental per year is $80,000 per year or $6667 per month.
If I dont take mortgage, my net is like $2500/mth or yield of 3% (before other expenses).
If I take mortgage, my yield would even be much lower than that 3%.


That set me to thinking about 99LH and FH/999yr properties.
For $1mil properties and 99yr LH,lease is like $10100/yr or $842/mth.
if can achieve gross rental like $3k/mth, my net is $2158/mth or 2.59% before considering all other expenses.

If FH/999yr properties (similar size/location to LH), assuming 20% premium, "lease" would be like $1.2mil/999 = $1201/yr or $100/mth.
if can achieve same rental $3k/mth, my net is $2900/mth or 2.90% before considering all other expenses.

So does FH/999yr actually achieves higher yield than LH?

Does anybody actually consider lease life when determining which property for rental yield, investment, capital gains.
or does people only say say rental yield important, but does actual fact remains is capital gains more important.

I sure am confused.

[buttercarp]

If you are confident that you can profit from the rental during the remainig lease, then it is worthwhile buying the property.
For example recently i saw an ad regarding a geylang terrace house which cost about $180K with 9 years left, apparently can rent out about $3k per month. So if you can rent out at that price for the next 9 years then you can actually profit from it.

[devilplate]

If you are confident that you can profit from the rental during the remainig lease, then it is worthwhile buying the property.
For example recently i saw an ad regarding a geylang terrace house which cost about $180K with 9 years left, apparently can rent out about $3k per month. So if you can rent out at that price for the next 9 years then you can actually profit from it.

this type of ppty usually bot over by contractors to house their workers....no no for individual investors like us bcoz u nid to spend $$ to reno inorder to find tenants which is $$ goes down to drain liao bcoz only left 9yrs lease

[devilplate]

Hi, does anybody actually consider remaining lease in determining rental yield?

I was looking at some properties in commercialguru.

Some of the property leases are like 20 years left.

SO lets say, property is worth $1 million, the lease per year is $50,000 per year or $4167 per month.
If can get gross rental yield of 8%, so gross rental per year is $80,000 per year or $6667 per month.
If I dont take mortgage, my net is like $2500/mth or yield of 3% (before other expenses).
If I take mortgage, my yield would even be much lower than that 3%.


That set me to thinking about 99LH and FH/999yr properties.
For $1mil properties and 99yr LH,lease is like $10100/yr or $842/mth.
if can achieve gross rental like $3k/mth, my net is $2158/mth or 2.59% before considering all other expenses.

If FH/999yr properties (similar size/location to LH), assuming 20% premium, "lease" would be like $1.2mil/999 = $1201/yr or $100/mth.
if can achieve same rental $3k/mth, my net is $2900/mth or 2.90% before considering all other expenses.

So does FH/999yr actually achieves higher yield than LH?

Does anybody actually consider lease life when determining which property for rental yield, investment, capital gains.
or does people only say say rental yield important, but does actual fact remains is capital gains more important.

I sure am confused.

dun have to go to such dertail unless u r buying a 99LH ppty less den 70yrs

most of the times i agar agar.....older 99LH let say 10yr+, i expect higher rental yield of at least 5%+....if not i rather buy a newly TOP 99LH wif 4% yield

[hopeful]

If you are confident that you can profit from the rental during the remainig lease, then it is worthwhile buying the property.
For example recently i saw an ad regarding a geylang terrace house which cost about $180K with 9 years left, apparently can rent out about $3k per month. So if you can rent out at that price for the next 9 years then you can actually profit from it.

Gross is 20%.
$180k/9yr = $20k/year = 1667/mth.
so net rental = 1333/mth = 16000/yr = 8.88%.

Quite good. Was it already tenanted at $3k/mth or agent just say only. Did you take up the offer?

[gn108]

A good place to start is to study the yield from REITS.
Office Reits (residual 80yrs tenure ave) give 5-7%
Industrial (residual 40-55 yrs tenure ave) give 7-9%.
The shorter the lease, the more 'teminal' the rental yield will be.
FH land will keep it value and 'distorts' rental yield.

Hi, does anybody actually consider remaining lease in determining rental yield?

I was looking at some properties in commercialguru.

Some of the property leases are like 20 years left.

SO lets say, property is worth $1 million, the lease per year is $50,000 per year or $4167 per month.
If can get gross rental yield of 8%, so gross rental per year is $80,000 per year or $6667 per month.
If I dont take mortgage, my net is like $2500/mth or yield of 3% (before other expenses).
If I take mortgage, my yield would even be much lower than that 3%.


That set me to thinking about 99LH and FH/999yr properties.
For $1mil properties and 99yr LH,lease is like $10100/yr or $842/mth.
if can achieve gross rental like $3k/mth, my net is $2158/mth or 2.59% before considering all other expenses.

If FH/999yr properties (similar size/location to LH), assuming 20% premium, "lease" would be like $1.2mil/999 = $1201/yr or $100/mth.
if can achieve same rental $3k/mth, my net is $2900/mth or 2.90% before considering all other expenses.

So does FH/999yr actually achieves higher yield than LH?

Does anybody actually consider lease life when determining which property for rental yield, investment, capital gains.
or does people only say say rental yield important, but does actual fact remains is capital gains more important.

I sure am confused.

[hyenergix]

Gross is 20%.
$180k/9yr = $20k/year = 1667/mth.
so net rental = 1333/mth = 16000/yr = 8.88%.

Quite good. Was it already tenanted at $3k/mth or agent just say only. Did you take up the offer?

If it is this good, e owner will keep for himself. 99LH beside MRT is fine. Ulu places like ulu pandan is not, as owners r sitting on depreciating assets since enbloc potential is low.

[hopeful]

Thanks for all the info.

But even for older condos, hard to get 5-6% gross yield. It seems like seller would price their condos at around 4% yield max.

Example for The Arcadia,33 year condo.
Last 2 caveats lodged about $1000psf.
Last median rental 2011Q2 is $3.45.
That translates to gross of 4.14%.

so is it mathematically correct, all else being the same, FH has higher yield than LH? Market may say otherwise though if it disregard the cost of lease.

Seems to me that as long as population is growing, property prices will increase, so can disregard lease cost.

[devilplate]

Thanks for all the info.

But even for older condos, hard to get 5-6% gross yield. It seems like seller would price their condos at around 4% yield max.

Example for The Arcadia,33 year condo.
Last 2 caveats lodged about $1000psf.
Last median rental 2011Q2 is $3.45.
That translates to gross of 4.14%.

so is it mathematically correct, all else being the same, FH has higher yield than LH? Market may say otherwise though if it disregard the cost of lease.

Seems to me that as long as population is growing, property prices will increase, so can disregard lease cost.

mabe u can show us another FH nearby arcadia of similar sizes and yield of about 4%?

WOW! just realised there r 3 transactions at Arcadia of 12xxpsf to even 1319psf!!!

[hyenergix]

Thanks for all the info.

But even for older condos, hard to get 5-6% gross yield. It seems like seller would price their condos at around 4% yield max.

Example for The Arcadia,33 year condo.
Last 2 caveats lodged about $1000psf.
Last median rental 2011Q2 is $3.45.
That translates to gross of 4.14%.

so is it mathematically correct, all else being the same, FH has higher yield than LH? Market may say otherwise though if it disregard the cost of lease.

Seems to me that as long as population is growing (n e govt does another MBT), property prices will increase, so can disregard lease cost.

U missed out e impt part in red.

[buttercarp]

Gross is 20%.
$180k/9yr = $20k/year = 1667/mth.
so net rental = 1333/mth = 16000/yr = 8.88%.

Quite good. Was it already tenanted at $3k/mth or agent just say only. Did you take up the offer?

Saw ad on online proeprty web page.
Nope, did not cos I am not confident in getting tenants. And even I get tenants, I am not confident that I will get my monthly rental. What if they default and go back to their home town?

As devilplate said it is good for the contractors to house their own workers.

this type of ppty usually bot over by contractors to house their workers....no no for individual investors like us bcoz u nid to spend $$ to reno inorder to find tenants which is $$ goes down to drain liao bcoz only left 9yrs lease

[hopeful]

mabe u can show us another FH nearby arcadia of similar sizes and yield of about 4%?

WOW! just realised there r 3 transactions at Arcadia of 12xxpsf to even 1319psf!!!

hmmm, i just know of Arcadia because of their failed attempt to top up their lease. and at 12xxpsf 13xx psf, yield will even be lower.
Perhaps somebody can indicate 2 condos, FH and LH, side by side, similar age, then we can calculate yield net of lease cost.