Your Domain: Ross Greenwood’s four tips for would-be property investors

Nine News finance editor Ross Greenwood says buyers and those looking to become property investors need to forget one phrase almost everyone has been talking about.

Negative gearing.

Greenwood told Your Domain today that yield is the key thing anyone wanting to invest in property should know about.

What is yield?

Simply put, the yield is the rent you could receive divided by the price you pay.

“Clearly, the higher the yield, potentially the better deal you’re getting.”

But yield has a few variables, Greenwood explained.

• The rent you receive or could receive.

If it goes up, the yield goes up. Conversely, if you have to cut the rent to get a tenant, that yield goes down.

• Price

The more you pay for a property, the more you will lower the yield. The less you pay, the higher the yield.

“When buying a property to live in or to rent as an investment, the yield is always a really good guide as to the price you should pay,” he says, adding that the best properties have rising rents and low prices.

Greenwood says average yields of up to 5.4 per cent on apartments in Brisbane and Adelaide, 4.4 per cent in Melbourne and 4 per cent in Sydney shows that there is value in property, even if prices in capital cities have been falling over the past two years.

He also points to bank interest rates of 3.25 per cent, or even lower than 3 per cent, which means if an investor can get a low rate loan and keep a tenant, they will pay off the interest – plus more.

“Forget negative gearing, this is positive gearing and it’s one reason smart buyers are picking the eyes out of property markets and getting in right now,” Greenwood says.

Buyers looking to invest should remember the two keys for future property success:

• Make certain the property can be leased
• Make sure your lending is secure.

As capital city prices have fallen in the past two years, yields have been going up, giving a clue that there’s value out there.

Your Domain airs at 10am on Saturdays on Nine. Catch up on all episodes on 9Now