Property Investing – Do Your Numbers

In a few parts of New Zealand, capital growth has been as high as 100% over two years. By taking a medium term view to property investment nz and choosing the right professionals to work with, you can look forward to an attractive passive income or retirement savings.

New Zealand’s taxation set up means the harder you work and the more money you make, the more tax you pay. But under New Zealand’s tax set up, any “loss” from your rental properties often results in a tax rebate or at least a tax deduction, this can reduce any impact of a “loss”.

At we can help you to work out how to achieve your financial goals, below are a couple of calculations that can be a useful exercise for would be investors.

Two Useful Calculations

  • How do you know what a property is returning? – A properties return or yield is expressed as a percentage. In times past 10% was seen as a good return on investment. But nowadays that is a little high, 6-8% is a return on investment that is realistic to aim for.

    To calculate a properties potential return, apply the following calculation to any property that is of interest to you.

    expected weekly rent $ 400 per week
    multiply by X 52 weeks
    total annual rental income is $ 20,800
    divide this into the property’s purchase price $300,000
    annual return (gross) 6.93%

  • How do you determine what a property is worth to you, as the investor? – This is the reverse to the above calculation – this determines what you are prepared to pay for the investment property.

    Assuming an investor wants a 7% yield, to calculate an acceptable purchase price for a typical home-and-income-type property in a city. This property has 3 bedrooms upstairs (rented $450pw), and 1 bedroom downstairs (rented $250p/w), and has a rateable value of $400,000.

    total weekly rent ($450+250) $ 700
    multiply this by X 52 weeks
    total annual rental income is $ 36,400
    divide into yield required 7%
    acceptable purchase price $520,000

By using these calculations and sticking to the minimum yield requirement that you set yourself, you remove emotion out of the investing equation and make it about the numbers.

For further reading on Property Investment NZ, click on the articles below:

Setting Goals for Financial Independence – click here

Tips for Becoming a Property Expert – click here

Buying Rules for Property Investment – click here

5 Tips to Add Value through Renovation – click here

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