Your rental yield is only as good as your rent estimate. Overestimate rent by $50 a week on a $650,000 property and you overstate gross yield by 0.4 points. Here is a reliable way to estimate rent before you buy.
Key takeaways
- Use leased comparables, not just advertised ones.
- Adjust for bedrooms, bathrooms, parking, condition and location within the suburb.
- Cross-check with suburb median rents.
- Get a written appraisal from a local property manager.
Step 1: Find comparable properties
Look for properties within about 1 to 2 kilometres with the same bedrooms, bathrooms and parking, of similar age and condition. Focus on properties leased in the last three months. Advertised rents show what landlords hope for. Leased rents show what tenants paid.
Step 2: Adjust for differences
Adjust up or down for:
- An extra bathroom or car space
- Air conditioning, dishwasher, storage, outdoor space
- Renovation standard and age
- Street appeal, noise, and walking distance to transport, schools and shops
- Furnished or unfurnished
Step 3: Check days on market
If similar properties are leasing within a week or two, your estimate can sit near the top of the range. If they sit for a month or more, aim lower and allow more vacancy.
Step 4: Cross-check with the median
Compare your estimate with the suburb’s median rent for the same property type. If your figure is well above the median, be sure the property justifies it.
Step 5: Get a rental appraisal
Ask one or two local property managers for a written rental appraisal. It is usually free and gives you a range based on their current listings and tenant demand.
Use the estimate in your numbers
Run the low end of your range through the calculator. If the property only works at the top of the range, it may not work at all. The target yield calculator shows the rent you need for the yield you want.
Watch out for listing rents
Sale listings sometimes quote the current lease, which may be above or below market. Ask for the lease, its expiry date and the rent history. A property let well below market can be an opportunity. One let above market may face a drop at the next lease. More in rental yield myths.
What rent do you need?
Work out the weekly rent a property needs for your target yield.
Frequently asked questions
How do I find out what a property will rent for?
Look at similar properties leased nearby in the last three months, adjust for differences, check the suburb median, and get a written appraisal from a local property manager.
Are rental appraisals free?
Usually. Property managers provide them to win management business.
How accurate are online rent estimates?
They are a useful starting point but can miss condition and features. Check them against leased comparables.
See what this property would yield
Enter the price, rent and costs to get gross yield, net yield and weekly cash flow.
General information only. This calculator and content do not consider your personal circumstances and are not financial, tax or legal advice. Speak to a licensed professional before making investment decisions.
