Take a two-bedroom in Yunusobod at $148,000 letting for $890 a month. Gross yield: 7.2 per cent. That figure is accurate and it is what almost every listing will quote you. It is also not what arrives in your account.
Subtract the void. A well-presented flat in that district is empty about three weeks a year between tenancies, which is six per cent of the rent. Subtract management, if you are not going to be the one taking the call about a leaking mixer tap on a Sunday: eight to ten per cent locally.
Subtract maintenance and the building charge — for a new block with lifts, a generator and a staffed lobby, budget one month's rent a year, more once the building is past ten. Subtract tax at the applicable rate on rental income, and the cost of the two months of works between long tenancies that everyone forgets.
The 7.2 becomes something between 4.8 and 5.4 depending on how honest you are being with yourself. That is still a reasonable return in this market, and it is a number you can plan around, which the gross figure is not.
The comparison that matters is not against a bank deposit; it is against the same money in a different unit. We model three options and show the assumptions, because the assumptions are where the argument actually is.
