Q&A: Yields

As a rule of thumb: What, typically, would you currently expect to earn (net per annum before tax) from: a) A clean & tidy 3 bed residential property in say, Balmoral/Sandringham? b) A tidy $2m commercial property in industrial East Tamaki? What do you reckon is the quickest and least painful way to really learn about commercial property? (Work as a researcher for you for free?) Do you think we are experiencing a Great Property Market Correction where, instead of house prices seriously tanking, rents will climb to the point where it will become worthwhile to hold residential in the absence of significant annual appreciation? I conscientiously read and enjoy your newsletters.
Best wishes Diana
PS Didn’t attend ’2011:The Outlook’ but I did get the workbook and audio programme (Queens Road, Panmure – brilliant!)

Dear Diana
As a rough guide you can expect around 3-4% yield from the Balmoral/Sandringham property- but it all depends on the number of bedrooms, condition and many other factors so this figure cannot be relied upon.
The commercial property in East Tamaki could return anywhere form 6.5% to 10% depending on the quality of the tenant and the property. There are so many variables in these exercises that far more detail would be required to come up with a better answer. I think rents are due for a big correction
again depending on position ad quality. Poorer areas cannot afford big rent rises so investing to more affluent areas would be the way to go.
Cheers, Olly

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