http://propertyinvesting.com/forum/topic.asp?TOPIC_ID=6190
SIS Rule no.7 as follow(Selling Price divide by 769) x 2 = 13.52% Gross Yield Return.
No matter what the selling price is, this will show what the weekly rental must be to achieve a 13.52% GYR, which is now applicable for +ve cash flow properties at 7% interest rates.
An easy rule to calculate mentally for a 15.6% yield is divide rent by 3, multiply by 1000 to get the house price.
These houses are out there. so this may help with easy calculation.I’ve always used this rule : purchase price divided by 1000(knock off three zeros) times 2.5 = weekly rent. eg $100,000 rent at $250 pw, $60,000 rent at $150pw. etc.
This is abit simpler than the S.I.S rule, after all it is only to knock out properties that arn’t worth looking at in more closlyand the 11 seconds Rule.
If you consider all this rule they all try to make money. where the 11 secs rule is the one that make less money. I am already struggle to find property with 11 seconds rule. By introducing more rule which will close to impossible to find one property to match it. But it’s still possible.
Currently I am also looking for property returning as low as 8.8% and still happy with it.
Good luck with the new rules.
Warm Regards
ChanDollars
[Keep going, you’re nearly reach the end of financial freedom]Do you know, before I was introduced to this site, and Steve’s book (in that order), I’d never heard of the 11 second rule. Interest rates were at 6%, and I wouldn’t buy any property with a return of less than 6.5%. I think that shows my -ve gearing focus, but I also did my calculations on rent vs interest, rather than taking into account all other costs as well.
I suppose it’s cos I had a job that I intended to stay in for at least another 10 years.
Cheers
MelMelbear,
Back in 2000 I was so happy when I got a 5% rental yield. I got no ideas about 11 secs rule as well. Sine I was introduce to this site (still don’t remember how) I keep an eye on property using 11 secs rule.
Warm Regards
ChanDollars
[Keep going, you’re nearly reach the end of financial freedom]Hi Guys,
The sis rule is just a real accurate equation for someone who is looking for +ve cashflow property on 7% interest.
Though i thought i would share some other rules that most people dont know and other formulas and caculations.
1. The Golden Rule
2. The 1.6 Rule
3. Whats your rent rule?These are just 3 more rules though, they are pretty dam accurate as well.
Cheers,
sisS.I.S,
Please explain each of these rules.
Warm Regards
ChanDollars
[Keep going, you’re nearly reach the end of financial freedom]Explanation of Golden Rule Only used on I/O
I found this somewhere but im not sure who to give credit for this, but here is the Golden Rule.
Rent = min 1.4 x interest cost
If rent is $200 pw = $10,400 then Golden Rule says pay max of $106,122 (Yield Return is 9.8%)eg. $106,122 x 7% interest = $7,428 x 1.4 = $10,400
Though the purchase price will adjust dependant on what the interest rates is used on the calculation.
Cheers,
sisThe 1.6 Rule
(Weekly Rent x 1000) / 1.6 = What the Maximum purchase price should be.
Eg. Weekly Rent = $250 pw
($250 x 1000) / 1.6 = $156,250
$156,250 at 80% loan = $125,000
This equals a +ve cash flow property due to its 20% cash deposit.
Cheers,
sisS.I.S,
What I see from all the above Rules is that I have to carry my calculator everytime I am hunting down for IPs.
Anyway, Thank you for the explanations. I will try to use it in the future.
Warm Regards
ChanDollars
[Keep going, you’re nearly reach the end of financial freedom]Whats your Rent Rule?
Purchase Price / 1000 = The minimal rent. Though you must put a 20% cash deposit to keep the minimal rent on the purchase price.
This rule only applies to -ve geared properties, so the minimal rent you can achieve if you are try to achieve capital gain.
Though the loan must be over 30 years and the loan must be I/O.
eg. $250,000 / 1000 = $250 pw
$250k @ 80% LVR = $200k
So your rent must be a minimum of $250 pw on a I/O Loan. If try to achieve capital gain.
Cheers,
sisDamp I just relied I done nothing at all at work today.
Warm Regards
ChanDollars
[Keep going, you’re nearly reach the end of financial freedom]Where do you find IP with a 10% return?
Travel back to 2004!!!!!!!!
Sorry couldn’t help myself.
It’s not uncommon to get a 10% return in Newzealand or US at the moment without trying to hard.
Also people will tell you to think creatively like create another bedroom,renovation or subdivide.
Or another option is looking into listed property trusts etc.
Cheers.
What I have done is develop a comparison page set ou as below
Property costs
Stamp duty
Lenders Fees
Soloicitors Fees,
Building inspection
Other
Total
Deposit
Loan amount
Loan Repayments
Rates
Body corp
Insurances
Maintenance
Vacancy
Agents fees
Other
Total out goingsRental income
Net Income (Loss)
Net income / Property cost
Tax deductions first year
Tax deductions other years
Tax advantage
My income (costs) per weekThis little page sorts out really quickly which properties make or loose money. You have to know the scales of such things as stamp duty , interest rates, and your own tax advantage.
Each property has its own dimensions and it is hard sometimes just use a simple rule. However they are a good starting point
Jaffasofts link at the base of my post is great for assessing IP’s also..
“Money is a currency, like electricity and it requires momentum to make it Effective”
Count The Currency With This Online Positive Cashflow CalculatorThanks guys… its good to double check your numbers with other peoples rules…
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