RENTAL YIELD = Annual Rent / Property Value x 100Two problems with Rental Yield.
1. Annual rent does not factor in expenses such as management fees, mortgage cost, insurance, void period and maintenance.
2. Property value does not take in to account the total cash you have invested in buying the house if bought through mortgage. Stamp duty, legal and other fees are also not considered.
RETURN ON INVESTMENT (ROI) = Annual profit / Total cash investment x 100
Whereas, ROI gives you the actual cash flow (profit) you make on your cash investment.CASH – On – CASH….!