I am a sole parent and am just applying for a line of credit on my home equity – this should give me only about $70,000 max to play with.
I read Steves book about the 11 second formula but can’t work out how to get the exact percentage.
If I bought this property I have seen for $29000 and it is tenanted at $80pw wht would my +CF % be?Hi Jensshed,
On first inspection it passes the 11 sec guide….80 p.w. —> 40K.
I reckon your example would eventually look like this ;
Capital
PP = 29K
SD = nothing I believe at this level ??
All other costs to acquire ~ 1KCashflow
Loan of 30K
Interest p.a. @ 7% = 2.1 K p.a.
Ownership total outgoings ~ 1 K p.a.
Total cost to hold = 3.1 K p.a.Rent = 4.1 K p.a.
Positive cashflow = 1 K p.a….(look out for those faulty water heaters – they’ll eat that up in no time)
Your gross rent = 14.34% (52*80 / 29000)
Interest = 7%
Outgoings = 3.44% (1/29)Therefore your +CF% would be {14.34 – 7 – 3.44} = 3.9%.
Pretty good stuff. Good luck with your endeavours.
Cheers,
Dazzling
“No point having a cake if you can’t eat it.”
ok jensshed
this is how i’d work it out
Income per year 48 weeks @ 80pw = $3840
less
interest (29,000 plus costs 2,000)
7% =2,170
Rates and water 800
insurance 300
Management 9% of rent 3,840 = 345
Repairs 300
TOTAL
,915So its not really cash positive at all.
This is a great example of how a 14% return may not even be cash positive
hope this helps
regards westan
http://www.nzpropertytogo.com
check it out !Or it could be a little industrial shed where the carpenter has signed up on a secure 5×2 lease where he pays $ 80 p.w. nett plus GST plus all the outgoings on the shed…in which case it is wildly positive. Like 7% plus.
Assumptions are a wonderful thing, but distort the figures dreadfully if slightly out, especially with an example such as Jensshed has suggested, where the gross numbers are so small.
What are the other cashflow details Jensshed ??
Cheers,
Dazzling
“No point having a cake if you can’t eat it.”
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