Apartment returns

Question from Lyn updated on 20th May 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 expert Ollie Mitch responded:

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.

Ollie Mitch is head of sales at Iconicity, leading apartment investment specialists and the largest private buyer and seller of apartments in Auckland City. Phone 09 300 5073, email oliver@iconicity.co.nz or visit www.iconicity.co.nz

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