What's a decent gross yield?

[RHarris]

Got a general question about gross yields. What is a decent yield? I see alot of investors happy with 5%-5.5% which is the average pay the list price deal. This might work in a high growth area but most people seem to buy these as investments in medium growth areas. I have been looking for 7% in a medium growth area and find it very dfficult to get this return. Should I aim lower? say 6%? It seems in lower growth areas people aim at 10%. How strict should you be in hitting the yields you want? I find it to easy to stray due to frustration.

[flyernzl]

It depends on what you are trying to achieve - income or capital growth?

Don't say both, thats like trying to get a girlfriend who has stunning good looks and is also a superb cook - theoretically possible but highly unlikely in practice.

My focus is on income, so I negotiate for 9% (or better).
Remember that (in Auckland anyway) your running costs of rates, insurance and so on will soak up enough so that your 9% is irretrievably reduced to 7.5% in the hand.

[TheLiberalLeft]

Or stunning looks and an IQ over 120. Equally as difficult, and equally as sexist.

I too am finding >5% difficult in the areas I know well enough - the Shore and north.

[flyernzl]

Well I wouldn't know what to look for in a boyfriend.

[TheLiberalLeft]

I'm sure someone looking for good looks wouldn't go far past you, flyer.

[cube]

A girlfriend yielding 9% sounds like a good prospect to me

[TheLiberalLeft]

That's gross.

[Orkibi]

it depends on which property and in what location ????

[RHarris]

What do you mean by which property? Should it matter? if its old, new, unit, apartment, standalone. I think wouldnt make much difference? Wouldn't you try get a decent yield across your whole portfolio as you need some decent cashflow. I'm looking in medium growth areas so that is the location I'm aiming at.

[Orkibi]

RHarris,

Generally speaking 9% gross yield for NZ or say Main centers is not to bad. - But DEPEND WERE.

In Clendon park 9% is standard if you buying at 7% you paying to much.
In Central Auckland 8% is a very good deal!

And for commercial retail on Queens street 7% is a great deal. (most selling now bellow 6%)

All depend on the property and location, if you buy say 8%+ in central AKL it is pretty much guaranty that you also have a good chunk of equity on day one.

[halfempty]

If you send her out to earn some income she should clear 10% without being too gross.

[LivingTheKiwiDream]

I agree with Orkibi in that a decent yield is very dependant on what you want to achieve and your overall strategy. Type of property i.e. cashflow or capital gains will determine the your required yield. I'm not familiar with the Auckland market but have recently purchase a cash flow property in Christchurch. I'm aiming for cashflow positive properties and my buying rules were a 9% yield or over and i found this quite difficult to achieve and most of my offers were rejected and even ended up arguing with one estate agent. Should you aim lower? really depends on your personal circumstances and what you are willing to accept as a minimum. For example; will you drop your required yield to 7.5% instead of 10% if the property is only going to make you $25/week instead of your target $50/week. In the end I ended up settling for an 8.5% yield as it is still cashflow positive which is my main target.

[RHarris]

THanks for the advice. My dilemma arose cos I turned down a 6.75% yield cos I wanted 7%. Thinking back it seemed stupid to be so tough with the numbers cos I'm more after capital gains and it was in a reasonable growth area.

[eri]

and so you learn

[mattinvestor]

im a cash flow investor, so i prefer the 10% gross yields over capital growth