the example we have a property here in a suburb of Sydney Land Valuation Gold Coast that recently sold for seven hundred and sixty thousand dollars and currently is being advertised looking for a tenant and they’re asking for four hundred and sixty dollars a week in rent now the Sydney market is such that it’s very likely they’re going to get their asking rent there’s very low vacancies at present so there’s a lot of demand
if we take four hundred and sixty dollars per week convert that to an annual amount by multiplying by fifty two point two we find that if you do the maths and I recommend that you check this with your calculator it suggests a gross yield with three point one six percent that’s the ratio between four hundred and sixty dollars per week expressed annually semi apply by fifty two point two divided by seven hundred and sixty thousand when we look at the subject property in our example valuation the subject property is being advertised for five hundred dollars a week
what we can do is convert the five hundred dollars a week again by multiplying by a fifty two point two into its annual amount and divided by the three point one six that we’ve calculated from our comparable and that gives us a gross capitalized value of eight hundred and twenty six thousand dollars and if you go to the study guide you’ll find that there is a few extra dollars in there that we’ve rounded out of the slide here now also in the study guide we said well that’s all fine we now have established that the property should be worth about eight hundred and twenty six thousand
we can walk away from that however the investor because we really want to get into their mind to work out how they’re looking at the thing they’re going to be considering the costs are going to be involved in operating this investment and in the study guide we list those costs and by time you take the annual costs away from the annual revenue that reduces the total revenue somewhat and it reduces the yield from a gross yield of three point one six to a net yield of a little bit over two percent and again if you go to the study guide you’ll find maths is all laid out well short of it is that by the time