COMMENT: Capital gain vs cash flow

When it comes to property investors, there are two main types - those that invest for capital gains and those that invest for cash flow

Investing for capital gains is more like speculating. The investor buys a rental property with the hope that it will increase in value. If that does happen, they will often refinance the property and buy another one with the exact same intention. 

The gross yield (the annual rent divided by the purchase price) often does not even enter their thinking when buying a property, as it is of very little - or even no importance. This is especially true when it comes to cities like Auckland (where most of the speculators like this buy) where the yields are very low, often 4 – 5%. 

Having a yield this low only gives the investor enough weekly rent to cover the interest on the bank loan plus hopefully a little left over for rates and insurance. Often there’s nothing left over for any maintenance.