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  1. #1

    Default Property investment - Apartment and yield calculations

    Hi
    I am looking to invest in an apartment in Auckland (Stonefields) and I wanted some advise on whether this would be a good investment?
    The apartment will be a new build and the purchase price is approximately $470k.

    I expect that I should be able to get about $500 per week. If I have the yield calculation correct ($500*52/$470000) I get 5.5%.
    I appreciate this doesnt take into consideration factors such as vacancy periods and other expenses like body corp/rates etc but what I would like some advice/guidance on is 5.5% a reasonable investment?

    The suburb is a desirable suburb given the development within Stonefields and neihbouring areas. I need to get an exact rental appraisal but expect it should be no less than $500 per week.

    Your feedback would be much appreciated.

  2. #2
    Join Date
    Jun 2013
    Posts
    1,980

    Default

    In short, no.

  3. #3

    Default

    Thanks, what would be considered a good investment yield wise? 6%, 7%, X???

  4. #4
    Join Date
    Jun 2013
    Posts
    1,980

    Default

    For an apartment, you'd want the yield to cover ALL expenses at least, and to achieve that, not require a large capital outlay up front.

  5. #5
    Join Date
    Jun 2013
    Posts
    2,104

    Default

    Quote Originally Posted by DB2014 View Post
    Thanks, what would be considered a good investment yield wise? 6%, 7%, X???
    Positive cash flow at least.

  6. #6

    Default

    For an apartment work out the net yield....far more meaningful.

  7. #7

    Default

    Thanks, can you please clarify on net yield so I can calculate correctly?

  8. #8

    Default

    I would keep it reasonably simple and subtract major known costs from your gross rent income.

    1. 2 weeks rent for vacancies;
    2. Interest costs;
    3. property manager fees;
    4. body corp fees;
    5. Insurance;
    6. rates.

    I wouldn't include maintenance, as with an apartment it is very variable and possibly out of your control anyway.
    Also I wouldn't include principle repayments as you are basically paying yourself with those.


    A return on equity (ROE) figure may be of interest to you as well.

    That is your net return / amount of equity you are putting in, as a percentage.

  9. #9
    Join Date
    Aug 2009
    Location
    Auckland
    Posts
    1,080

    Default

    Gross yield means nothing!

    My opinion, those stonefields apartments are far too expensive (for investment purposes) and, thus, a bad investment.

  10. #10

    Default

    I think you need to subtract your body corp levies off the rent to get a truer yield.
    And I understand that is about $100 pw.

    They aren't really investment apartments. Especially as the B/C is the lowest it will ever be due to it being a new build with minimum maintenance issues.

    Try the Zest or Harvard on Hobson in the city . An apartment for around 200k, rent around $400 pw. b/c approx $50pw

    Not so beautiful but the numbers add up


 

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