Which is better? 8% Gross Yield or 5.5%
It might sound like a really silly question, but which is better?
Higher Yield – Tokoroa Property, 8% Gross Yield
First property I could find in Tokoroa on Realestate.co.nz was 176 Balmoral Drive.
On the market for $229,000.
Currently tenanted $280 pw.
That’s a 6% yield based on 50 weeks. But say you could wave your magic wand, and buy it for $175,000. Now that’s an 8% Gross Yield!
Would you buy it?
The full figures are below, but it loses $2,402.50 per year! Would you still buy it?
Lower Yield – Hamilton Property, 5.5% Gross Yield
First property I could find in Hamilton on Realestate.co.nz was 3/60 Wellington st.
On the market for $619,000.
Currently tenanted $660 pw.
That’s a 5.5% yield based on 52 weeks.
Would you buy it?
The full figures are below, but it makes $3,463.40 positive cashflow per year!
OVERALL GROSS YIELD AND LOCATION
Gross Yield is a great tool for comparing properties in the same location. But be careful with different locations. If one location has low rent, a high Gross yield property can still be negative cashflow!
So make sure you work out and review the full cashflow for any investment you are looking to buy!
In this example, the cashflow on the 5.5% newer property in Hamilton is a lot better than the 8% older property in Tokoroa.
NOTE – this doesn’t mean I would buy either!
I hope you have found this useful
Kind regards
Ross Barnett
Property Accountant | New Zealand
Finding Your Financial Ikigai: The Japanese Art of a Balanced & Purposeful Life
In a world that often measures success in financial terms, the Japanese concept of Ikigai offers a refreshing perspective. Transcending the boundaries of culture and geography, this philosophy loosely translates as "a reason for being". Ikigai is a convergence of what you love, what you're good at, what the world needs, and what you can be paid for. It's an approach that represents a broader view of prosperity, encompassing joy, purpose, and contentment. As financial advisers, we find this particularly compelling. This article delves deeper into how Ikigai can not only enrich your life but also inform your financial decisions for a more fulfilling journey.
Lifetime Book Club: Intentional by Chris Bailey
In a world full of distractions, half-finished to-do lists, and “I’ll get to that later” energy, this book feels like a helpful nudge back to what really matters.
It’s not about doing more for the sake of it. It’s about doing the right things, with more purpose, more clarity, and a little less chaos.