Leasehold apartment returns?

Question from C updated on 19th July 2013:

Is a 9% net return on a student apartment worthwhile? I fear there is not enough capital growth on this type of investment however the low cost of these apartments and the cash flow generated will help me buy better houses down the line. I'm planning to get a couple of these apartments just to generate cash flow, then use the cash from these to help pay the mortgage on the next property I buy. Is this a good idea? The apartment is leasehold and since everything is managed it should be fine right? What are your thoughts?

Our expert Ollie Mitch responded:

A 9% net return is a great return.  The question is what the net return will be after the next ground rent review?  I would look very carefully into the details of the lease before making any decisions.  There are some great freehold apartments offer a good return (8% net) which may be a better return in the longer term.

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 or visit

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