By Gerald Tay (guest contributor)

Net Rental Yield (NRY) is a fundamental concept in the real estate industry. Yet, it is often misunderstood and sometimes incorrectly used. This post will take a deep dive into the concept of NRY, and also clear up some common misconceptions:

1. Price versus Value
2. Definition of Net Rental Yield (NRY)
3. The difference between Cap rates and Required Return
4. Yields and Bubbles
5. Realised Profits vs. Paper Profits

Real Estate Price versus Value

Before moving into Property Valuation, I need you to first understand one key investment fundamental, price is not always equal to value.

Never do yourself a disservice by asking novice questions on price because you’ll only get novice answers.

For example:

You: Do you think paying $1,300per square foot is a good deal for this property?

Property Agent/Friend/Neighbour/Relative/’Expert’: I think so because it’s already at a discount and other surrounding units are transacted at ...