When you buy an investment property in New Zealand, it can be difficult to gauge exactly how much rent to charge. You don't want to feel like you're overcharging people, but you also have to make your mortgage repayments and ideally create rental income. And unfortunately, there's no easy answer – it all depends on your particular situation.
Just like with all investment advice, we can help you out by thoroughly looking through your situation and how much you can spend on a property. Once all the details have come together, we can give you an accurate picture of how to charge your rent appropriately to stay on track for financial independence. But even then, does it match up with the expected rents from the Ministry of Business, Innovation and Employment (MBIE)? Let's have a look at some areas in the North Island.
Auckland Central East
The MBIE suggests that for a three bedroom apartment in this area of Auckland, you should reasonably charge $703 per week – that's the average rent it has calculated. As we discussed in our investment property whitepaper, a good rule of thumb for making the right rental yields is $400 per week on a $400,000 property, $500 on a $500,000 property and so on. With a the REINZ indicating median prices in Metro Auckland were $692,000 in November 2014, this seems about right.
For the same style of property in central Hamilton, the MBIE suggests charging $404 as the average rent. While this may seem much less profitable than buying in Auckland, remember that the median home price in the REINZ figures is $380,000. So really, you're making similar rental yields!
One thing to note is that in the Auckland market, there is much more variation in rent prices than in Hamilton. It's difficult to navigate, which is why getting a team of property investment advice experts on your side is an ideal way of setting your rents correctly.
Here's to your financial independence!
Authorised Financial Adviser / Investment Property Expert