Yields

Question 1

What is a yield?

Answer 1

Measure of investment return, expressed as a percentage of capital invested
Calculated as income divided by price x 100

Question 2

How would you calculate Years Purchase? What does this show?

Answer 2

Divide 100 by the yield

Question 3

What factors would you considering when determining a yield?

Answer 3

Prospects for rental and capital growth
Quality of location and covenant
Use of the property
Lease terms
Obsolescence
Voids
Security and regularity of income
Liquidity

Question 4

What is an All Risks yield?

Answer 4

Yield which encompasses all the prospects and risks attached to a particular investment

Question 5

What is a True yield?

Answer 5

The profit produced by an investment, considering the effect of the time value of money (= the way that payments received in the future are worth less than those received now)

Question 6

What is a Nominal yield?

Answer 6

Initial yield assuming rent is paid in arrears

Question 7

What is a Gross yield?

Answer 7

Yield based on the net purchase price (i.e. not adjusted for purchasers’ costs)

Question 8

What is a Net yield?

Answer 8

Yield based on the gross purchase price (i.e adjusted for purchasers’ costs)

Question 9

What is an Equivalent yield?

Answer 9

Average time weighted yield reversionary property is valued using an initial and reversionary yield

Question 10

What is an Initial yield?

Answer 10

Simple income yield for current income and current price. Also known as a running yield.

Question 11

What is a Reversionary yield?

Answer 11

Reversionary yield describes the anticipated yield of a property once the rent reaches the estimated rental value (ERV). It’s calculated by dividing the ERV by the valuation.

Under rented - assuming the rent is at market level

Question 12

What is a Running yield?

Answer 12

Yield at one moment in time