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Simple English definitions for legal terms
income yield
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A quick definition of income yield:
Income yield refers to the amount of income an investment generates in relation to its cost. It is often expressed as a percentage and is calculated by dividing the annual income by the cost of the investment. This is similar to the concept of capitalization rate, which is used to determine the value of an income-producing property based on its expected income. Essentially, income yield is a measure of how much money an investor can expect to earn from an investment each year.
A more thorough explanation:
Income yield is a term used in real estate that refers to the amount of income an investment property generates in relation to its value. It is also known as the capitalization rate.
For example, if an apartment building generates $100,000 in annual rental income and is valued at $1,000,000, the income yield or capitalization rate would be 10% ($100,000/$1,000,000).
This metric is important for investors as it helps them determine the potential return on investment for a property. A higher income yield indicates a higher return on investment, while a lower income yield indicates a lower return on investment.