Prominent Melbourne developer Len Warson, whose plans to build a “Tesla Town” eco-village as part of a $2 billion community in Alphington are being thwarted by a legal dispute with the site’s vendor, paper giant, Amcor, is renting out the historic Prahran house he bought for $9.4 million last year.

Grandview, in Grandview Grove – revered as the inner suburb’s best street – is seeking $3250 per week, or $169,000 annually, making it Prahran’s most expensive ever residential rental.

Warson temporarily set a suburban price record when he bought Grandview (that watermark was soon broken by another home in the street which sold for more than $10 million).

On a 1676 square metre block, Grandview is one of the rare residential properties in the suburb to be configured with a tennis court. A six bedroom home on the site, built in 1895, had been part renovated prior to hitting the market last year.

Warson famously bought the Prahran home just five months after paying $7.1 million for another historic mansion, Stainton, at 80 Clowes Road, South Yarra (the builder flipped this home at the end of last year for a speculated $9 million).

Kay & Burton’s Darren McMullin is the leasing agent for Grandview (pictured, top and left).

In 2013, with joint venture partner Alpha Partners, Warson’s company Glenvill paid Amcor $120 million for its redundant Alphington Paper Mill on the banks of the Yarra River, about 6.5 kilometres north east of the CBD.

The consortium plan to replace the 16.5 hectare block with a 2500-dwelling mixed use village Yarra Bend, which will include the country’s first Tesla Town.

However plans to build on the block have

been delayed because, the owners claim, Amcor has not decontaminated the site sufficiently. Amcor meanwhile is counter-suing the environmental engineer for not detecting all the asbestos on site.

It is reported an additional $11 million to $25 million is required to remediate the Alphington site. Amcor has already reportedly spent $17 million to demolish buildings and clean the land.

Despite this, yields appear to be largely misunderstood: many people don’t know how to calculate or estimate one, nor how to interpret what they mean.

Some simple answers to common questions about yields, including how to calculate one, are here:

What is the yield?

The yield is the equation of a property’s annual rental return divided by its purchase price (or value). It is expressed as a percentage.

How to calculate a yield? A two-step guide

1. Divide a property’s annual rent by its sold price (or ‘asking price’ or ‘estimated value’).
2. Multiply the result by 100 to express the yield as a percentage.

So if a house sold for $750,000 which was returning annual rent of $33,800 (or $650 per week) – divide $33,800 by $750,000, then multiply by 100. The yield should be 4.51 per cent.

Traditionally average yields rise when the economic backdrop and demand for property is slow. Yields tighten in red hot markets, a bit like those on Australia’s east coast capitals over the past few years.

Why is the yield so important? The economic insights it provides

Whether you’re a property buyer, seller, investor, observer or commentator – even a politician – yields provide several telling insights about the state of real estate demand.

A yield lets you estimate all sorts of things about a property including what it could sell for, how much it could achieve in rent and how attractive it would be to investors – the sophisticated ones who compare yields for residential, office, industrial and retail assets.

Yields also provide an idea as to the strength of an economy – when there is lots of wealth chasing property, yields go down. Yields go up when the economy weakens (not that Australia has seen that for some years).

Yields are also used to gauge the depth of certain property sectors – for example, more investors chase shops than factories. This competition has resulted in retail yields being on average lower compared to industrial.

The four types of yields commonly quoted in real estate:

Ensure you ask your broker which yield they are providing you as some make deals sound better than they are. Here are the main yields explained, each with an example:

PASSING YIELD – GROSS
Asset worth: $500,000; Annual rent: $26,000
Gross passing yield: 5.2%

PASSING YIELD – NET
Asset worth: $500,000; Annual net rent: $23,000 (being 26,000 less landlord outgoings of $3000)
Net passing yield: 4.6%

Replace “Passing” with “Market” in other cases including, for example, off the plan purchases (where an agreement with a rental value hasn’t been signed). Or for property enthusiasts who have an idea of their asset’s value and achievable rent:

MARKET YIELD – GROSS
Asset worth: $500,000. Annual rent is estimated to be $28,000.
Gross market yield: 5.6%

MARKET YIELD – NET
Asset worth: $500,00. Estimated annual rent less outgoings leaves $24,500.
Net market yield: 4.9%

What is a good yield?

This depends who you ask.

If you’re a seller, you want to trade on the lowest yield possible.
If you’re a buyer, it is the opposite.

Many investors aim for a yield as close to (or in some rare cases higher than any) bank interest rates. Others show no regard for yields if they plan on, for example, repositioning the property in the market with a refurbishment, or replacing it.

Yields vary across sectors (eg, residential, industrial) and cities (eg, Sydney, Hobart), but on average circle between 3 and 8 per cent.

If you’re considering buying, selling or renting out a property, we suggest advising a professional – like an agent – to get an idea about what factors drive yields for each of the residential and commercial property sub-sectors you are interested in.

If you’re an investor – compare property yields to these alternatives:

• Bank interest rates. The rate you see on term deposit offerings is a yield (the return you will get back in a year);
• Shares. The stockmarket uses the dividend yield to provide a return for investors. A dividend yield is the ratio a company will pay you out annually relative to its share price.

Got questions about yields in your area?

Do not pay for it. Contact me at marcpallisco@gmail.com and I can try to direct you to a research department.

The Dynamic Ads for Real Estate tool is an advance on the company’s article “boost” option (a paid reach program which targets users likely to be interested in either the poster’s content or website).

Dynamic Ads for Real Estate will integrate with a real estate agent’s listing data and search engine to distribute relevant listings to Facebook users based on their search preferences and activity. It will include properties for sale and rent.

Like boosted articles, Dynamic Ad for Real Estate listings will appear in a Facebook user’s feed.

The tool can automate what many marketers currently undertake as a manual function (ie, posting a property listing to the agent’s Facebook page then paying to “boost” it for the campaign period). Facebook’s tool can also be connected to another social media page, Instagram.

Reported in many international real estate journals overnight, this realtybiznews article describes how the Dynamic Ads for Real Estate tool builds on the two year old and successful “Dynamic Ads” initiative.

And Google’s foray into real estate listings?

Those with long memories may remember Google entered into the real estate listing space in 2009. It abandoned the foray which would have seen it take on potential clients including some of the biggest global portals, realtor.com and rightmove.uk, and individual agencies, which also manage some sophisticated sites.

Google’s initiative has not been forgotten in Australia with agents still acknowledging the potential for it to quickly penetrate the market utilising initiatives such as Maps and Street View. Google’s tool made (sale and rental) listings, with photos, appear alongside a map users were searching. The multinational technology giant blamed “low usage” and “proliferation of excellent property-search tools on real estate websites” for closing the service in 2011.

Two lavish Melbourne homes which recently sold for more than $4.5 million have been added into the mix of prestige rental offerings.

In Toorak, Melbourne’s most valuable suburb measured by median sale value, the advertisement for a listing at 10 Church Street provides a rare insight into what a contemporary mansion looks like unfurnished.

The modern home (see top image) sold for $4.6 million in March (both this link to a property report and this 2014 YouTube video, show the home with furniture).

But prior to 10 Church Street selling, it had rented for $3250 a week – which is the same price agency Kay & Burton is asking time around. Darren McMullin is the leasing agent.

In the neighbouring suburb of Armadale, a historic four bedroom home on prestigious Royal Crescent which sold for more than $5.1 million in June is now for rent asking $2500 per week. The listing for 6 Royal Crescent is, again, with Kay & Burton’s Mr McMullin.

Meanwhile in East Melbourne, historic mansion Alta Vista (which translated from Italian means “high view”) hit the rental market this week asking $1700 per week. At 81 Wellington Parade South, Alta Vista, near the MCG, must seem like comparatively good value to the recently listed Toorak and Armadale counterparts – seeking substantially less in rent despite selling for more (reportedly some $5.6 million, in mid-2015).

Caine Real Estate is managing the leasing campaign for the c1876 Alta Vista. The freestanding double storey Victorian with a bluestone wall and wrought iron gate has an established front and back garden which includes three palm trees and six birches.

Here are some of the other highest priced rentals publicly available in Melbourne:

52C Lansell Road, Toorak

Luxico is offering a super-sized opulent apartment at 52C Lansell Road, Toorak, for just over $4600 per week.

The fully furnished offering is within the Lansell Manhattan and includes three bedrooms, two car parks and lift access.

9 Stephens Street, Balwyn North

A contemporary European style mansion is for rent in Balwyn North for suitors who have $91,000 to pay as a bond.

On top of that, the first month’s rent will circle about $15,050 – equating to $3500 per week. Number 9 Stephens Street offers an “incomparable family lifestyle” with five bedrooms, five bathrooms, a home theatre, wine cellar and a deep north facing garden.

No pets, however, are welcome at the “executive’s paradise” which is for rent via Selling Melbourne Real Estate.

22 South Wharf Drive, Docklands

One of Melbourne’s newest streets – South Wharf Drive in Docklands – is also becoming one of its most valuable, with mini-manor style multi-storey waterfront homes known to sell for more than $6 million recently.

Not surprisingly, renting in the exclusive row is also expensive – a listing, with RT Edgar’s Thomas Vernon and Kim McInnes, seeking $3300 per week. For the price, the address offers five bedrooms, five bathrooms and “breath-taking views of both the waterfront and city”.

Number 22 South Wharf Drive also includes lift access to all four levels including the basement four-car garage.

1A Miller Street, Brighton

Agents often acknowledge that there are some Brightonians who won’t live in a house unless they can see, hear and smell the sea. A contemporary offering at 1A Miller Street, Brighton, meets all that criteria, but comes at a cost – $3200 per week.

This opulently appointed four-level Golden Mile property, available from early July, is for lease via Biggin & Scott’s Caroline Hurley.

12 Chatsworth Avenue, Brighton

Not far away at 12 Chatsworth Avenue, Brighton, a renovated Tudor mansion hit the market last week asking $3200 per week. The five bedroom home, in one of the suburb’s most revered tree-lined streets, is for lease via Marshall White’s Lucy Arter.