What makes a condo, townhouse, or house and lot for sale in the Philippines a good investment? One might think that buying a property in a prime location like Makati, Taguig or Ortigas (Pasig), automatically equates to a good investment. Any real estate broker or agent will often tell you that the best property investment highly depends on the property’s rental yield. Having knowledge of rental yields will give you a good idea of how quickly you can recover or make profit from the money you’ll invest.
How to calculate rental yield
By definition, rental yield is how much rental income a property produces each year compared to its total value. The formula is as follows:
Gross Rental Yield = (Monthly Rent * 12 / Property Cost ) * 100
The property cost should factor in the property purchase price, along with additional costs like Stamp Duty, Brokerage Fees & Renovation or Maintenance Costs.
Higher rental yields mean better investments
Once you have the rental yield for the property you want, it’s time to compare. Most people only look at affordability or location as points of comparison without thinking too much about the return. It’s a sound approach, since properties are assets that appreciate through time. On the other hand, a more serious investor would want to compare properties by their rental yields to get a better idea of how much time it would take to get the best returns out of their investment.
A comparison of rental yields in Metro Manila
The Data Science Team at ZipMatch took a look at a year’s worth of data from 75,000 Metro Manila properties for for sale and for rent listed on its site. Out of this data, they were able to get the average rental yield for each city in Metro Manila.