Apartment returns

Lyn asks:
(updated on Monday, May 20th 2013)

What do you advise when looking at buying an apartment as an investment? Freehold units with net yield 5.5% or leasehold units at 7% with freehold lessor interest of 6.5%?

Our Experts Answer:

While the leasehold apartment may seem to be the better return at first glance, the long-term return is likely to be higher on the freehold apartment.  Both apartments will enjoy compounding returns with rents increasing year on year.  However much (if not all) of the increased income for the leasehold apartment will be lost when the ground rent increases. The returns you are quoting are a little low. I suggest you do a bit more research to find a better return on a good quality freehold apartment.

Heartland Bank - Online 6.69
SBS FirstHome Combo 6.74
Wairarapa Building Society 6.95
Unity 6.99
Co-operative Bank - First Home Special 7.04
ICBC 7.05
China Construction Bank 7.09
BNZ - Classic 7.24
ASB Bank 7.24
ANZ Special 7.24
TSB Special 7.24
Unity First Home Buyer special 6.45
Heartland Bank - Online 6.45
China Construction Bank 6.75
TSB Special 6.75
ICBC 6.75
ANZ Special 6.79
ASB Bank 6.79
AIA - Go Home Loans 6.79
Kiwibank Special 6.79
BNZ - Classic 6.79
Unity 6.79
Westpac Special 6.39
China Construction Bank 6.40
ICBC 6.49
SBS Bank Special 6.55
Kiwibank Special 6.55
BNZ - Classic 6.55
Co-operative Bank - Owner Occ 6.55
ASB Bank 6.55
AIA - Go Home Loans 6.55
TSB Special 6.59
Kainga Ora 6.99
SBS FirstHome Combo 6.19
AIA - Back My Build 6.19
ANZ Blueprint to Build 7.39
Credit Union Auckland 7.70
ICBC 7.85
Heartland Bank - Online 7.99
Pepper Money Essential 8.29
Co-operative Bank - Owner Occ 8.40
Co-operative Bank - Standard 8.40
First Credit Union Standard 8.50
Kiwibank 8.50