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  • Profile photo of silhouettesilhouette
    Member
    @silhouette
    Join Date: 2006
    Post Count: 2

    I hardly think they are seriously flawed…the maths still work.

    It’s been a while since I got 2% on a mortgage (like never) – still, if you can get 2% and can get a IP at $177K rented at $295, that would give you 8.6%; or if you paid $265K at 8% then the return is around 5.7%.

    So, as I said in my original post “Not great but not too bad in the current climate.”

    Anyone who solely uses mathematical formula to decide on buying IP needs to reconsider their investment strategies.

    Profile photo of silhouettesilhouette
    Member
    @silhouette
    Join Date: 2006
    Post Count: 2

    It’s a good question and I haven’t found it anywhere here!

    I think you will find it is still the best rule of thumb to ensure you are cash positive.

    However as some of my investments in the current climate are not this way – I use another variation – which might be considered the 11.578 second rule.

    $rent / 2 x $1000 x your best bank interest rate.

    Eg (say, best bank rate you can get is 6.84%)

    $295 / 2 x $1000 x 1.684 = $248,390 is the top price to pay

    Which would give a return of 6.17%. Not great but not too bad in the current climate. This is not a recommendation but is just one that I use as a guide (I do apply the 11 second rule first – cause I know that is the perfect scenario)

    Hopefully someone else will post the updated 11 second rule so I can see how my maths works!

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