Achievable annual rental =
$20,800 per year ($400 pw)
Moving Median Yield (MMY) =
The REAL VALUE of this property is: $20,800 ÷ 4.82% =
When demand is high, market sentiment will push the price beyond this value and likewise if market sentiment is negative, prices can fall to beneath the property’s real value.
Every potential property purchase should be assessed by comparing the asking price to the real value.
If the asking price is above the real value then the property is too expensive or overpriced – and should not be purchased. If the asking price is equal to or less than the real value then there is ‘value’ in acquiring the asset.
The potential for future Capital Growth on the asset is directly and hugely affected by the purchase price. Obviously an ‘overpayment amount’ will first need to be cleared, before any future Capital Growth can be achieved.
PURCHASE ONLY AT THE REAL VALUE OR BENEATH!
ALWAYS REMEMBER: PRICE ≠ VALUE