Purchase price V Rental income formula.

[lyonsie]

I once heard Ivan Yates on the radio talking about a formula to calculate what the purchase price of a house should be based on the rental income it can get.
He was discussing the over priced house market in the country at the time.
Does anyone know of such a formula. I'm sure it's still relevant in the market today.

 

[Joe_90]

I'd imagine its the yield. Annual rental income / purchase price.

So let's say the property can be rented for €1,000 per month that's €12,000 per annum.

If the property costs €240,000 including stamp duty legal ect, then the yield is 5%.

This is a very basic method it does not cater for idle months, some people suggest using 11 months as the annual income. It does not include the annual management charges for apartments.

Again you could deduct the management charges from the total income.

There are a good few other issues that need to be considered, potential resale value, no of other rentals in the area neighbours ect.

 

[Brendan Burgess]

Hi lyonsie

We don't speculate about house prices on askaboutmoney, and this thread would lead inevitably to that.

Brendan