Reading the numbers on any deal

Yield is simply the rent a property earns as a percentage of what it costs. It lets you compare a $500k house and a $1.2m one on the same scale, the way you'd compare interest rates on two savings accounts.

There are two versions, and the gap between them is where a lot of investors get caught out. Gross yield = annual rent divided by the purchase price. Net yield is the same sum, but after you subtract the running costs - rates, insurance, maintenance, property management, body corporate. Gross flatters the deal; net tells you the truth.

Why net matters: take that 6.0% gross example. Knock off, say, $8,000 a year for rates, insurance, maintenance and management and your net yield drops to roughly 4.4%. That's not a rounding error - it's the difference between a deal that washes its face and one that quietly costs you money each week.

Always ask which number you're being shown. Listings and sellers love quoting gross.

Yield is a tidy percentage; cashflow is what actually lands in (or leaves) your bank account each week. It answers the only question that keeps you up at night: *can I comfortably afford to hold this?*

The sum is plain English. Start with the rent. Subtract every cost: mortgage interest, rates, insurance, maintenance, management fees, and an allowance for vacancy (weeks with no tenant). What's left is your cashflow. Positive means the property pays you to own it. Negative means you top it up from your own pocket - that's negative gearing, and it's a choice, not a failure, as long as you've planned for it.

Interest rates move, and so does your cashflow. A property that's cashflow-neutral at one rate can swing to clearly negative if rates rise a couple of percent. Before you commit, run the numbers at a higher interest rate than today's - if it still holds together, you've got a real buffer.

Remember too that NZ rules on what you can claim against rental income - interest deductibility and similar settings - have changed more than once. Rules change, so check the current settings, and treat this as general guidance, not financial advice.

Cashflow keeps you in the game; capital growth is usually where the wealth is made. Capital growth is the increase in the property's value over time. A $600k home growing 4% a year would be worth roughly $24,000 more after twelve months - often far more than its annual cashflow.

The two pull in different directions. Higher-yielding properties (think provincial towns) often grow more slowly; lower-yielding ones (think bigger cities) can grow faster but cost you to hold. Neither is 'right' - it depends on your goals and your cash buffer.

ROI (return on investment) ties it all together: your total return - cashflow plus capital growth - measured against the actual cash you put in (deposit, legal fees, any reno). It's the fairest way to compare two completely different deals.

A word of caution: past growth doesn't guarantee future growth, and property values fall as well as rise. Use realistic, conservative assumptions. Lean on data like CoreLogic and recent comparable sales rather than a seller's optimism, and never bank on a number you can't afford to be wrong about.

The renovated kitchen, the lovely street, the sunny deck - none of it changes the maths. Plenty of investors talk themselves into a poor deal because the property *felt* right, then spend years topping it up. The discipline that separates steady investors from hopeful ones is simple: decide on the numbers, and let the property either pass or fail the test.

Build yourself a checklist and apply it to every property, the same way each time:

Emotion isn't the enemy of every decision - it's the enemy of *this* one. Fall in love with the spreadsheet, not the staging. When you analyse every deal the same disciplined way, you stop chasing and start choosing, and you can act fast and confidently when a genuinely good one appears.

Run the numbers on a real property next, and see how the test feels in practice.