Ok. I'm almost embarrased to ask, but.... what are these terms?

Alright, I've brought a few properties in my time with DH, well 4 but I am 32 and DH 34 . I am still quite green at investing in property. I keep reading threads and have found the following terms and not sure what they mean;

Yield- how on earth do people calculate it? For instance if you declare the yield of the property based on rental income compared to loan repayment amount, or do you factor in all the other expenses, or even go to the extent of including tax trade offs into the yield?
UCV- Don't even know what abbreviation this is for, figure it is financial.
LVR- Lending rate? Seriously clueless.
And how are these things calculated?

We quite like buying, dislike selling at all, love the hunt, love renovations, and that is the main reason we have invested in property. We have just gone for properties where the rent covers at least the repayments and some of the other costs. But the financial side of things, we tend to just let the banks tell us yay or nay.

Can anyone shed some light on these terms for me?

Gross Yield = Total Rental per year / Price of Property
Net Yield = (Total Rental per year - total expenses ) / Price of Property
UCV = not sure what you mean what is the context?
LVR = Loan to Value Ratio = Loan Amount / Value of Property

UCV= Unimproved Capital Value

Thanks for the definition

Just working out net yeild;
- Say property is brought at $150K
- Rent per week is $200 so $10400 a year
- Rates are $1200 a year, Water connection $1380, REA commission is 8% of rent roughly plus postage + petties so around $900, Land lord Insurance is $1000 a year.
- Not taking into account money spent on the property during that year, any improvements or just maintenance.

So Net yeild = 10400 - 4480 / 150, 000
Net Yeild = 3.95%

Is this correct? Do any of these calculations take into consideration the initial cost of the loan such as the conveyancing, land tax, loan application costs, stamp duty? And ongoing costs like interest paid on loans?

What is a good LVR to be running on? I'm thinking the lower the better, but that is just me.

Add interest to find yield - after ALL expenses you have net yield.

Depends on what you feel comfortable with in terms of LVR.

If you go over 80% you pay LMI (varying scales depending on LVR - i.e. at 85% you pay less LMI as a % than at 90% or 95% LVR - this is because the insurer takes on less risk if you put a 15% deposit rather than 5% so will have a lower premium for you to pay.)

You can buy less properties with lower LVR though - so I stick to 90%.

The one off costs like lawyers, stamp duty etc... are added to the cost base of your purchase (i.e. 100k purchase + 3k in fees = 103k purchase effectively).

All ongoing expenses are mostly deductible - except for improvements on the property for example (such as adding an extension) which is a capital cost and like stamp duty/legals - added to the purchase price of the house.

Hope that clears it up a little!

RI,

Ok, based on the information you presented, I have added a few more assumptions, for my spreadsheet to spit out an answer.

Based on financing of 80% lend, 30% marginal rate, no vacancy, no impact on existing land tax liability, an interest rate of 6.2%, no tax variation in place and no depreciation.

Gross yield is 6.93%, Net return before tax is 3.39% and an after tax return of 3.86%. This also represents a cash flow loss per calendar month of $137.20.

You would need a deposit of 45% to make the investment cash flow neutral, given the numbers provided and assumed above.

Aaron_C said:

LVR = Loan to Value Ratio = Loan Amount / Value of Property

Click to expand...

A lot of people mention portfolio LVR. Do people add the PPOR into their Portfolio LVR numbers?

Say you fully own your PPOR ($200K) and have 4 IPs of $200K each at 80% LVR. Is your portfolio LVR 64% (when you include PPOR) or 80% (when you exclude PPOR)?

.................lol

Aaron_C said:

UCV = not sure what you mean what is the context?

Click to expand...

Dandin said:

A lot of people mention portfolio LVR. Do people add the PPOR into their Portfolio LVR numbers?

Say you fully own your PPOR ($200K) and have 4 IPs of $200K each at 80% LVR. Is your portfolio LVR 64% (when you include PPOR) or 80% (when you exclude PPOR)?

Click to expand...

Rule of thumb, if the bank wants to know when applying for finance for a purchase, its fair enough to include it.....

Thanks Buzz.

Ruff investment said:

DH, well 4 but I am 32 and DH 34 .
?

Click to expand...

what about DH? Darling Husband?? The world really is full of TLA's and each new community you get involved in has its own TLA's which could overlap with previously understood TLA's.

Maybe there is a business idea in that - almost jargon buster for TLA's?

matto_ said:

what about DH? Darling Husband??

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Yeah, actually, I always thought DH was something not so nice....

Recently, my woprkplace started using the term "Fee For Service" in contracts which they abbreviate to FFS..... it is rather enlightening to read a contract that says things like "after hours work will be carried out FFS...."

The Y-man