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Before you begin investing in real estate it’s important to understand some basic economic principles.
Before you begin investing in real estate it’s important to understand some basic economic principles. Namely, gross yield and net yield. Continue reading to learn more about understanding gross yield vs. net yield in rental properties.
The gross yield is the percentage of return a specific property generates before deducting all expenses such as maintenance and management.
For example, if a property is priced at $1,000,000 USD and rented for $100,000 USD per year, that property generates a gross rental income of $100,000 USD and a gross yield of 10%.
The net yield of a property is the percentage of return generated after deducting all expenses, such as management fees, maintenance costs and others.
For example, a property is priced at $1,000,000 USD, is rented for $100,000 USD per year, and costs $25,000 USD per year. This property’s net rental income generates $75,000 USD and the net yield is 7.5%. The monthly rental income that users receive will be determined by the net yield of the property they own and the number of fractions owned.
For example, if someone spends USD $100,000 on a property that generates a net yield of 10%, then they will receive USD $10,000 per year in rental income paid to their wallet.
This is called the monthly return formula. It’s important to know this formula so that you understand how much income you’re going to be earning passively each month. When you invest in fractional real estate NFTs with Metropoly, you’re guaranteed monthly rental income. To learn more about investing with Metropoly starting with as little as $100 USD, please visit Metropoly.io.
