A south Invercargill home has possibly set a record for rental investment returns.

Bayleys Invercargill said the two-bedroom house in Appleby was bought for $35,000.

The buyer, an experienced local investor, cleared the section and promptly added two more bedrooms by converting a second lounge for just $2500.

The property was now being rented out for more than $400 a week. Including the total cost of the house, Bayleys said the rental yield was 54 per cent.

Bayleys Invercargill manager Trevor Mason said that in Dunedin the average yield was 8 to 10 per cent. Aucklanders were doing well to get 4 to 6 per cent.

''There are no official records when it comes to the highest rental yields from residential property in New Zealand, but anecdotally among our network of 60 Bayleys offices, we believe this would have to be a New Zealand record.''

However, David Whitburn, the president of the Auckland Property Investors Association, said the return was ''complete rubbish'' as it was a gross figure.

''It's in an area of extreme social deprivation, extremely high unemployment, total lack of desirability.''

Landlords in such areas had to factor in the possibility of high tenant turnover, high rates, and possibly higher insurance and maintenance bills.

Net yields, which allowed for vacancy rates and operating expenses, or actual cashflows gave a truer picture of a property's investment return.

''I've found too many members have been disappointed for buying 15 per cent gross yields in areas like Murupara [in the Bay of Plenty], only to find out their property's only rented out for 30 weeks of the year.''

- © Fairfax NZ News