Calculate the complete return on a NZ investment property: annual rental income, all expenses, mortgage costs, pre-tax and after-tax cash flow, gross and net rental yield, total return including capital gain, and break-even analysis. Updated for 2026 interest deductibility rules (100% deductible for new builds, phased in for existing rentals) and current bright-line test settings.
| Year | Rent income | Expenses | Mortgage (P+I) | Net cash flow | Equity | Cumulative return |
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A property investment's total return has two components: the income return (rental income after all costs and tax) and the capital return (the increase in the property's value over the hold period). Many NZ investors focus on yield but the capital gain often dominates total return over a 10-20 year period. A property with a 3% net yield and 5% annual capital growth produces a higher total return than one with a 5% yield and 2% growth, particularly when leverage is factored in.
Gross rental yield is simply annual rent divided by purchase price. A property worth $650,000 renting for $600 per week earns $31,200 per year (after one week's vacancy), giving a gross yield of 4.8%. Net yield deducts all operating expenses (rates, insurance, property management, maintenance) before dividing by the purchase price. If those costs total $12,000 per year, net yield is ($31,200 minus $12,000) / $650,000 = 2.95%. Net yield is the more meaningful figure for comparing properties.
Interest on residential rental property borrowings was phased back in from April 2023, with full restoration to 100% deductibility completed by April 2026. As at April 2026, all residential rental investors can deduct 100% of their mortgage interest against rental income when calculating taxable income. New builds retained 100% deductibility throughout this period. This restoration significantly improves the after-tax cash flow for highly geared investors who had seen large tax increases during the phase-out period from 2020-2023.
New Zealand does not have a general capital gains tax, but the bright-line test taxes gains on residential property sold within a certain period of purchase. For properties purchased on or after 27 March 2021 and before 1 July 2024, the bright-line period is 10 years for existing homes and 5 years for new builds. Properties purchased on or after 1 July 2024 have a 2-year bright-line period regardless of property type. If you sell within the bright-line period, the capital gain is added to your income and taxed at your marginal rate. Properties that have been your main home for more than 50% of the ownership period may be exempt. Always confirm your position with a property accountant.
Positive gearing means the property generates more rental income than it costs to hold (expenses plus mortgage payments). Negative gearing means costs exceed rental income, creating an annual shortfall. In NZ, this shortfall can be offset against your other income to reduce your tax bill, which is why negative gearing has historically been attractive for high-income investors. However, cash flow is genuinely negative: you are paying money each month in the hope of capital gain. The tax saving offsets some of the shortfall but does not eliminate it. The calculator shows your pre-tax and after-tax cash flow position clearly.
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