I have been recently working with a customer who is looking to buy a 3 bedroom holiday home in Queenstown. My customer asked me to give her an idea of the investment yield that she could achieve. Now, firstly I cannot provide any investment advice, but I am always happy to help someone to research the facts and figures.
It is always a trickier question to answer when you haven’t yet honed in on a specific property, and there are a number of factors to consider in this equation
- What is the location? (Central Queenstown, or somewhere out of town)
- How much are you planning to spend?
- What will the quality of the property be?
- How much are you going to use it? (so how much time can it be rented out for)
- What are the average nightly rates for Queenstown?
- What is the average occupancy?
OK, so if you haven’t yet chosen a property, the first 3 are going to be tricky, so sometimes it helps to pick a sample range of properties so that we can get a bit more specific
$450k – $500k
Medium – High Quality
We can now look at the average nightly rates for a 3 bedroom in the central Queenstown area for each week / month of the year. Then by overlaying this data on the occupancy data we have for the area we are able to provide an estimate of the potential yearly revenue for this property.
E.g. (Not actual figures)
Nightly rate = $300 p/n
Occupancy = 40%
Potential Gross Revenue = $43,800
At this point we have all of the information needed to form some kind of estimate around the potential yield, and in this case if we had spent $475k then we would be looking at a gross yield of 9.2% (before expenses).
Of course, these figures are purely an estimate and actual returns will vary depending on the finish of the property, the market, how you list it etc. However, I think its useful to get a sense of what the returns could be in a market that you are considering. It’s important to make a fully informed decision, especially if you intend to finance your purchase and have loan obligations that you need to meet.
If you would like us to crunch some numbers for you and work out the potential return in an area, there is a “free report” option on this website. Simply enter in a few details and we will send it through,