Calculating Good Property Deals

One of the most important questions that I get asked by a landlord before they buy property is how do they work out if it's a good deal for them? 

There's many ways you can look at it. 

There's gross yield which is the annual income generated divided by the purchase price. I'll say that again, gross yield equals the annual income from your property divided by its purchase price. 

Net yield is the annual profit generated by your property, that's after all costs divided by the purchase price. 

Or you've got return on investment (ROI) that's the annual profits generated divided by the actual cash you put into the deal. This can sometimes also be called return on capital employed (ROCE). 

Or you've got ROCI, which is the same thing. 

If you bought the property without any finance and bought it with cash, then ROI and net yield would be the same result. 

The best measure for any investor should be ROI, return on investment. This tells you how much your hard earned cash is generating and tells you how hard it is working for you. 

It's quite simple, it's how much money you put into the deal and how much money you get out. So it's not that difficult. But it is important. 

So remember it's how much you put in, that's all your costs; so that's your solicitors fees, your accountants fees. Whatever you had to pay out to get that property, then that's what it cost you.