Invercargill property returns 54%

Invercargill’s real estate sector has been sent a shockwave by a house generating a rental yield of 54%.

Friday, July 6th 2012, 12:00AM

by The Landlord

The property in the suburb of Appleby was sold for $35,500.

The new owner – who does not want to be identified – spent $2500 converting the property from a two-bedroom, two-lounge home into a four-bedroom, one-lounge home.

The owner also cleared the section, removing rubbish and vegetation from the garden and is now renting the property for more than $400 a week, in a long-term lease.

That puts the rental yield, using the total cost of the house, at 54%.

Bayleys Invercargill manager Trevor Mason said it had stunned the city. Residential property investment returns were normally in the teens.

He said the new landlord had spotted a development opportunity to create two additional bedrooms by installing an internal room in the second lounge – and this on its own had enabled the rental returns to almost double for a minimal financial commitment.

“There are no official records when it comes to the highest rental yields from residential property in New Zealand, but anecdotally among our network of 60 Bayleys offices, we believe this would have to be a New Zealand record,” Mr Mason said.

“By comparison, in Dunedin the average yield for a rental property tenanted by students is between 8% and 10%. At 12 %, investors are doing well. Palmerston North and New Plymouth are around similar levels, and Hamilton slots in just below that. And in Auckland, you’re doing well to get between 4% and 6% return.

“With all this talk about fortunes to be made in shares, gold, or gambling on foreign currency movements, at the end of the day, residential property is still delivering an outstanding return in times of uncertainty. It just goes to show that Kiwis love their bricks and mortar investments.”

Mr Mason said that subsequent to selling the home, his office had subsequently seen a jump in enquiries from other Invercargill investors looking for similar type properties near the Southland Institute of Technology campus, and was even now tracking interest from as far away as Auckland.

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