Would you accept a NZ$289 monthly shortfall on this Auckland condo?

G

GoodBirch

Property investor
I’m considering a 4-bed condo in Auckland where the location appears to have durable rental demand. Using conservative rent of NZ$12,660 and allowing for reserves, it comes out roughly NZ$289 per month negative. I can comfortably cover that, but the return seems dependent on future rent growth or appreciation.

Would you treat the shortfall as a calculated holding cost, or reject a deal that does not support itself from the start?
 
On those numbers, it is an appreciation bet unless there is a clear, evidence-based route to higher rent. Is NZ$12,660 the annual gross rent, and does the NZ$289 already include vacancy, management, insurance, rates, maintenance and any condo-related fees? One omitted cost could materially widen a relatively small-looking shortfall.
 
I wouldn’t automatically reject it. Negative cash flow can be deliberate if the purchase still works under conservative assumptions and the shortfall is small relative to your wider finances. The danger is calling the rent conservative without testing tenant turnover and realistic vacancy for this particular 4-bed layout. I’d also run the figures with no rent growth for several years rather than relying on Auckland demand in general.
 
I’m less comfortable than Mohammed. NZ$289 is the smooth monthly average; maintenance, vacancies and insurance changes arrive unevenly. Financing sensitivity matters too. If a higher borrowing cost or one extended vacancy turns this from manageable to stressful, the advertised shortfall is misleading. Appreciation may happen, but it does not pay the bills while you hold.
 
Ask the agent for the assumptions behind every line, then rebuild the calculation independently. Use at least three cases: current financing and expected occupancy, a vacancy plus repair year, and higher financing costs with unchanged rent. Confirm whether management, insurance, rates, maintenance reserves and condo fees are all included. If you would still buy under the middle case without needing appreciation, it may be calculated; otherwise Javier’s description is closer.
 
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