High yield is attractive. It’s tangible, measurable and easy to compare. But yield without context is one of the most dangerous metrics in property investment. Here’s why we’re cautious whenever yield becomes the primary conversation.
Yield is a snapshot, not a guarantee
A projected yield is based on assumptions — about rental income, vacancy rates, holding costs and management fees. Change any one of those assumptions and the yield changes. Change several and a 9% gross yield can easily become a 5% net yield or less.
High yield often signals higher risk
Properties in thin rental markets, with a narrow tenant demographic, or in regions heavily dependent on a single employer typically offer higher yields precisely because the underlying risk is higher. The market is pricing in the risk — even if the marketing material isn’t.
What gets missed when yield is the focus
- Capital growth potential — or lack thereof
- Liquidity risk — can you sell this property easily if you need to?
- Tenant quality and vacancy risk in the specific location
- Management complexity — some high-yield strategies require specialist management
- Interest rate sensitivity — high-yield properties are often highly leveraged
Our view: Yield is one input into an investment decision. It should never be the only input — and it should never override a careful assessment of the underlying location, risk and strategy alignment.