FAQ’s

What Does Capital Gains Mean?

Capital gain is the profit you make when you sell a property for more than you paid for it.Capital gain should never be counted on when you are looking to purchase an investment property. Capital gains are part of buying well in an area that you see potential growth. Some areas including small towns and rural areas don’t achieve the same capital gains as big cities do.

What is Yield?

Yield comes from the rental money received from rent. It's the rent a property could provide over a year, expressed as a percentage of its purchase price.

What is Gross Yield?

This is the income return on your property investment before any expenses, outgoings and interest. Gross yield is used when looking at the basic return on your investment, as it is simple to calculate and lets you easily compare properties with different values and rental returns.

How to Calculate Gross Yield?

To calculate, take the 'Annual rental income (Weekly rent x 52 weeks)' and divide by the 'Property value'. Then multiply this number by 100.

Example: Property value $650,000 and expected rent $550 a week.$28,600 ($550 x 52 weeks) (annual rental income)÷ $650,000 (property value)x 100Yield = 4.41%

What is Net Yield?

This is the income return on your property investment after all expenses, like insurance, rates, repairs and maintenance etc.How to Calculate Net yield

How to Calculate Net Yield?

To calculate, take the 'Annual rental income' and minus the 'Annual expenses or loss of rental income' from this. Then divide this number by the 'Property value' and multiply this number by 100.

Example: Property value $650,000, expected rent $550 a week and expenses around $5000 a year.$28,600 ($550 x 52 weeks) (annual rental income)- $5000 (annual expenses/loss)÷ $650,000 (property value)x 100 Yield = 3.63%

Example: Property value $650,000, expected rent $550 a week and expenses around $5000 a year.$28,600 ($550 x 52 weeks) (annual rental income)- $5000 (annual expenses/loss)÷ $650,000 (property value)x 100 Yield = 3.63%

What are the Outgoing Expenses of a Rental Property

  • Interest costs
  • Repairs and maintenance
  • Property management fees (though not if you manage the property yourself)
  • Insurance
  • Rates
  • Accounting fees
  • Water (most cities include water in rates)

How Much Should I Charge for Rent?

Its important to get the rent right from the beginning. If your rent is too high you run the risk of not getting a tenant at all. If you rent your property out too low you will miss out on income and have to pay the short fall yourself.

Talk to property managers and real estate agents in the area to work out what they think your property should rent for. Also look on Trademe for comparative properties to yours so you can get an idea of what you should put your rent at. This will then help you get the market rent at the right price.

Keep in mind you can only increase rents every 6 months, if you so need to based on market conditions.

Top tip to keep in mind. Your rental property is a business not a charity, you give people somewhere to live and you take the risk of having a mortgage and costs involved in maintaining the property. If you look after your tenants they will look after your property.