Yields Flashcards
What is a yield a measure of?
Investment return
How is a yield expressed?
A percentage of capital invested.
How is a yield calculated?
Rental income divided by capital value x 100
On what basis do you adopt a yield?
Comparable evidence
How is a Year’s Purchase calculated?
Divide 100 by the yield.
What is the Year’s Purchase?
The number of years required for the income to repay the purchase price.
What is the major factor in determining a yield?
Risk
What other factors are relevant in determining a yield?
Quality of location
Quality of covenant
Use of property
Lease terms
Obsolescence
Voids
Security and regularity of income
Liquidity - ease of sale
Prospects for rental and capital growth
What does return describe?
The performance of a property
What is used to find the internal rate of return?
A DCF
Why is there a yield gap between primary and secondary?
Reflects risk:
Obsolescence Longer voids Lower rental growth prospects Higher maintenance Loer quality covenant
What is the remunerative rate of interest used in the valuation of a fully let property let at market rent reflecting all the prospects and risk attached to that investment?
All Risks Yield
What yield assumes rent is paid in advance, not in arrears?
True yield
What is the gross yield?
Not adjusted for purchasers’ coasts e.g. an auction result
What is the net yield?
Adjusted for purchasers’ costs
