In Secret Agent’s latest Rent report we took a detailed look into the yield of each inner Melbourne suburb. See Table 1.
An investor should be looking to try and maximise yield when finding a rental property. However, they also need to be mindful of the relationship between yield and risk.
Often a higher yield can mean more risk, such as oversupply.
The higher yield of inner Melbourne (5.3%) reflects the greater risk premium. East Melbourne which offers a tight yield of 3.47% is the ultimate blue chip location, however the yield isn’t too attractive.
Be careful of looking solely at yield to making investment decisions. It’s possible to obtain yields above 10% in remote regional locations, but once a tenant has vacated, it may be a long time before another tenant is discovered.