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:
- Price versus Value
- Definition of Net Rental Yield (NRY)
- The difference between Cap rates and Required Return
- Yields and Bubbles
- 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 ...