Best suburbs in Australia to invest in real estate

The top Australian suburbs for highest rental yields have been ranked. See the list of suburbs and towns that offer the best rental returns.

Giselle Bueti

3 min read

May 25, 2024 - 10:54AM

News Corp Australia Network

Property

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A new report has revealed the top locations in Australia where investors can enjoy rental yields that go beyond 14 per cent.

Rental yield measures the return on investment for a rental property and according to Ray White data there are a number of locations across the country where the annual rental yield has skyrocketed. This means the rent in these areas will cover your loan repayments, insurance and other associated expenses, plus bonus money on top.

The report showed Australia’s best investment return is in the Victorian holiday town of Mallacoota, in the East Gippsland region. A median priced house in Mallacoota costs $580,000, but will return more than $100,000 a year in rental income; resulting in a yield of 17.9 per cent. The remaining top 25 yielding suburbs were dominated by Queensland and Western Australia.

Queensland's coastal suburbs Dolphin Heads (17 per cent) and Bucasia (16.5 per cent) were next on the list, while Western Australia’s Baynton (16.3 per cent) and Coolgardie (16.2 per cent) rounded out the top five.

This is good news for investors prioritising cash flow, as some of these high yield areas could be a great opportunity for positively geared rental property.

What is a rental yield

Rental yield is the amount of money you can make on an investment property by measuring the gap between your overall costs and the income you receive from renting out a property.

Understanding how rental yield works gives you a better idea of the ongoing return you will earn on your investment and can be useful when it comes time to review the rent on an investment property.

How to calculate gross rental yield

To calculate the gross yield, you divide the gross annual income by the purchase price of the property and multiply it by 100. Let’s say you bought a property for $800,000 and rented it out for $650 a week ($33,800 a year). The gross rental yield is 4.22% ($33,80/$800,000 x 100).

What is a good rental yield?

A good ROI for rental property is considered to be around 8% to 12% or higher. In metropolitan areas, gross rental yields typically range from 3% to 5%.