To Succeed in Property Investment, You Need to Buy Where You Can Add Value

As the property market becomes slightly more active, with small upward movements in median prices over the past few months, the key is to buy wisely and ensure the numbers work in your favour.

Auckland Market

Auckland is still a buyer’s market. Barfoot & Thompson’s November data showed over 6,000 listings, with just under 1,000 sold that month. At that rate, it would take six months to sell all the listings. Many developers also avoid listing all their units at once, for example, a developer with six townhouses might list only one to avoid flooding the market.

Rest of New Zealand

The rest of New Zealand is shifting. Hamilton is a good indicator: as of 31 October 2025, there were 868 listings, with 330 sold in October. That’s less than three months to sell all listings, down significantly from around five months in February 2025.

What Do the Numbers Look Like on a Poor Cashflow Rental?

Consider an Auckland rental property worth $1 million:

• Standard 3-bedroom, 1-bathroom on a cross-lease site
• Renting for $700 per week, giving a gross yield of 3.64% (based on 52 weeks)
• With a full $1 million loan, the property would lose approximately $21,000 in year one at an interest rate of 4.5% (interest-only)

Risk: If interest rates rise, losses worsen. Over 10 years, losses could peak at just under $36,000 annually (interest-only) if rates reach 6.5%.

In this scenario, the investor is essentially gambling on capital gains. To break even over 10 years, they would need around $250,000 in value gains. Inflation doesn’t help much here, as the investor is borrowing 100% upfront and must top up cash over time, losing the opportunity to invest that money elsewhere.

What Do the Numbers Look Like on an Added-Value Property?

Example: Adding Bedrooms

A property coach shared this case study of a Wellington duplex (two properties with a shared wall). Each property was converted from 3 bedrooms to 4 bedrooms.

• Purchase price: $755,000
• Renovation costs: $80,000
• Total cost: $835,000

Full case study here: Wolfe Property – 3 Rentals in 12 Months

1. Added Value / Equity

Although no valuation was completed, it’s often said that adding a bedroom in a city adds around $100,000 in value. With $80,000 spent on renovations (adding one bedroom to each property), a conservative estimate would be at least $70,000 in added value, an immediate equity gain.

2. Cashflow

Here are the cashflow numbers for the year following renovation:

• First year: $8,570 cash surplus before tax, or $8,296 after tax (thanks to a chattels valuation by Valuit)
• Estimated average annual surplus after tax over 10 years: $10,022, totalling $100,222 over the decade (interest-only)
• If switched to principal & interest over 30 years: around $1,000 cash shortfall per year
• Even if interest rates rise to 6.5%, the property would still generate a $1,037 profit (interest-only)

Overall Outcome

This Wellington duplex generates a cash surplus that can be used to pay down debt or support the investor’s lifestyle/retirement. While long-term capital gains are hoped for, they are not essential, the investor has already created initial equity by adding bedrooms, and the property pays for itself even with 100% debt.

Final Note

These are just examples. Before buying or selling, you must complete full due diligence and seek expert advice to understand how the numbers work for your situation. In general, however, adding value and achieving positive cashflow makes property investment far easier and less risky.

Article by Ross Barnett

This article is for general information only and is not intended as accounting, tax, or financial advice. You should seek advice from a qualified professional before acting on any information provided.

Any examples or figures are for illustration purposes only and should not be relied on for decision-making.