Can small towns really deliver yields x2 as high as bigger cities? | Ep. 169

In this episode, we discuss that it is often thought that smaller towns will deliver yields that are x2 as high as bigger cities. While that might be true for gross yields, this is generally not true of net yields. 

That is because smaller town properties often have higher costs as a proportion of the rent. For instance, if you were to buy two properties that are exactly the same, one in a small town and another in a big city, you would likely spend the exact same amount on maintenance. That means that maintenance takes up a bigger proportion of rent in a small town than it does in a big city. 

This show specifically discusses rates. Small towns often have rates (property taxes) that are just as high (in dollar terms) as bigger cities. That is because smaller districts have smaller population bases so need to charge more. This means investment properties in small towns often face significantly more cost. 

Generally speaking, once all costs are taken into account, small-town investment properties will still have a higher net yield, however that additional net yield might be as little as 1%. 

We also discuss the Epic Guide to Mortgages. This is a 9,500-word guide that teaches you how to get a home loan from a bank and then pay it off more quickly.