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Commercial Property Rental Yield

Commercial Property rental yield can serve as a helpful valuation tool and can be useful for benchmarking opportunities against one another. Whereas, for properties that need improvements and income is not certain, return on cost is a better way to evaluate economic value.<br><br>

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Commercial Property Rental Yield

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  1. Commercial Property Rental Yield A rental yield rate is the rate of return investors expect to receive from a property during the first year of ownership, excluding the cost to improve the property and financing costs. What is the rental yield rate? Rental yield rate is the dividend one would receive in the first year if the property were acquired with all cash. The rental yield rate is calculated by taking the Net Operating Income (NOI), which is the property revenue, minus the necessary operating expenses, and dividing it by the purchase price. Rental Yield Limitations For multi-tenant properties, especially opportunities where one is making several value-added improvements, the yield rate is partially irrelevant because of the instability of the underlying cash flows. What is Return on Cost? Return on Cost is a forward-looking rental yield rate. It considers both the costs: A. needed to stabilize the property B. purchase cost and the future NOI once the property has been stabilized. It is calculated by dividing the purchase price by the potential NOI. Contact Us https://yieldspace.com/ info@yieldspace.com +91 9513288384

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