Cash flow or capital gains; Investors tough call.

June 03, 2015 at 2:35 PM

I was at an Auction recently, chatting with an investor about Yields. We discussed how the average Auckland Investor is prepared to take a 3% yield or lower to secure property in Auckland as they are so fixated on Capital Gain.

If I was looking to buy and sell I guess the dissapointing yields are less important (I could make a quick buck and then get out), but how does that work for us ‘buy and hold’ investors.

It prompted me to look at the last few areas that I could get a ‘break even yield’ in Auckland. Here are two things I noted.

1. The average property in Auckland will yield 3.79%. Not great if you figure that the finance on the property will be around 5-6%.

2. The worst place in Auckland to buy yield based property is……..Herne Bay! The average yield here is 1.91%. Following closely is Castor Bay, Epsom and Oaraki.

So where are the best returns?

(Note: Figures are based on 3 bedroom properties, using data from REINZ current end of 2014)

Suburb

Average Sale Price

Average Rent per week

Gross Yield

Ranking

Weymouth

$301,036

$388

6.70%

1

Wellsford

$253,900

$304

6.24%

2

Clendon Park

$302,900

$347

5.96%

3

Kingsland

$479,944

$515

5.58%

4

Ranui

$392,380

$393

5.21%

5

 

It is interesting to see based on these averages that there is still areas of Auckland where you can get property that breaks even (if rates continue the way they are). While these look good compared to Herne Bay (or even the Auckland averages) we are still lagging behind other centres.

The best returns are traditionally found in the cheapest towns and cities (that still have demand for rental properties). Regional centres such as Rotorua, Tokoroa, Wanganui, the Hawkes Bay and Invercargill are some places where investors can find cash-flow properties with returns of 10% plus.

Where are you buying? Are you considering spreading your risk and rate of return across different geographical markets?

Ashley Giles

General Manager

Wendell Property Management



Tags: Auckland Property Investment Property Capital Gains
Category: Buying an investment property

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