In todays episode Hazel guides between yield and true rate of return in property investment. Hazel uses a straightforward example to illustrate how to calculate yield based on rental income and property value, highlighting that while a high yield can indicate good cash flow.

KEY TAKEAWAYS

• Understanding Yield vs. True Rate of Return: Yield is calculated as the total gross rental income divided by the property value, while the true rate of return considers the actual cash flow relative to the money invested in the property, providing a more accurate picture of investment performance.
• Example Calculation: For a property worth £150,000 generating £900 monthly rent, the yield is 7.2%. However, after accounting for mortgage costs, management fees, and other expenses, the true rate of return can be calculated, which in this example is 8.4%.
• Importance of Cash Flow: A strong cash flow and true rate of return are crucial for property investors, as they provide a buffer against market fluctuations and ensure that investments remain profitable even during downturns.
• Investment Strategy: Aiming for a true rate of return of at least 8% is recommended, as this offers a better alternative to traditional savings accounts, which may not keep pace with inflation.

BEST MOMENTS

"Knowing and understanding the difference between the yield of a property and the actual true rate of return is absolutely vital."

"The true rate of return will give you a much truer picture of what your investment is going to produce for you."

"My golden rule of thumb is to be making at least 8% true rate of return if you're going to go into a deal like this."

"If you have a decent level of cash flow and therefore true rate of return, it doesn't matter what happens to the market."

"The main advantage of buying a property is that it has the potential to increase significantly in value over time."

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ABOUT THE HOST

Having started her career as a professional, classical musician, Hazel de Kloe also had a personal quest to become financially free.

She and her husband built a successful, multi-million-pound property business, next to their own careers, but soon realised that true freedom doesn’t JUST come from being financially independent…

Having meant so much to her family, it has been her passion ever since, to inspire, educate and empower others on their journeys towards this 'Holy Grail'.

During one particular property mentoring session back in 2009, she had a powerful recognition of exactly how to facilitate this. Nicknamed now, The Wealth Whisperer, she has a unique way of getting to the crux of what is needed to help fulfil this quest.

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