[?]I have two questions:
1.Is there anybody out there who can explain to me the details of the 11 second solution?2.Can any one out there discuss with me the pros and cons of property investing under a company name as apposed to personally?
Assistance in these matters will be much appreciated, thankyou, KP [
].Hi Kirsty
1. The 11 second solution is if you find a house for $80,000 and it would normally rent for $160 a week it’ll be in the 11 second solution cause you take the rent of the house which is $160 and divide it by 2 and times it by 1000 which gives you $80,000.
2.Some of the pros of using a company is mainly for asset protection, you pay less tax than you would if you owned property in your own name and when you start to buy a lot of property it will be worth to have it under a company cause it will cost you to transfer the property from your name to the companys name.
Hope this helps
Thanks Rob[8D]
Hi Kirsty1. The 11 second solution is if you find a house for $80,000 and it would normally rent for $160 a week it’ll be in the 11 second solution cause you take the rent of the house which is $160 and divide it by 2 and times it by 1000 which gives you $80,000.
2.Some of the pros of using a company is mainly for asset protection, you pay less tax than you would if you owned property in your own name and when you start to buy a lot of property it will be worth to have it under a company cause it will cost you to transfer the property from your name to the companys name.
Hope this helps
Thanks Rob[8D]Robert, thankyou for you help. I was wondering if you could carify a few points for me?
1: So the 11 second solution determines whether it is worth my while to check out a property further? Why is the rental income divided by 2? And what would it mean if the solution is above or below the asking price?
2:Would purchasing under a company name mean you pay more personal tax as the profits filter down to you (as it is classified as earned rather than passive income?)?
Also do you think it best to invest under a company name when first starting out? And what about the “and/or nominee” clause within a property sale contract? Do you know if using this method would allow me to transfer personal properties to a business name without additional fees?
Thankyou so much for your help.[
] KP [].The more rent you get and the less amount you buy the property for (or need to borrow) the better the cashflow. If you’re interested in cashflow positive property, use this criteria to eliminate 90% of the properties and locations you see advertised.
I’ve found that in Melbourne you’d be hard pressed to get $1 per week rent per $1k of property value (1 or 2 bedroom flats in poorer suburbs outer suburbs come closest). Inner suburbs give less yield than that (eg I’m paying $120/w rent for a 1br flat worth $160-170k)[
].But if you go to a country town you’ll find the rent/value ratio higher, somewhere near $150/w rent per $100k of property value being common.
The 11 sec rule sets an even higher target of $200/w rent per $100k value. You can find such places, but they’re not numerous, and you might have to look interstate[
]. The benefit of this is you can pay the property off quickly (approx 10 years) from rental income without putting any of your own money[][].Peter
Kirsty
“Why divide by 2?” well I didn’t make up the rule but that is certainly a very easy number to remember (and do math in your head with !), so I think that simplicity was the driving force.
This rule is so you can very very quickly filter out properties taht are unlikely to give tyou the result that you need.
cheers
the B [
]Hi Kristy
You divide by two because there are 52 weeks in the year, which is close enough to 50 to be 50.
The other way that you can look at this is if the property is for sale for $80,000 then double it and drop some zero to arrive at $160 which is a 10% return.
I do this particular calc almost automatically to determine the ball park return for a property.
Some other examples are where rent is the same as the price $80,000 and rent $80 then return is 5%. If rent is $120 on $80k then 7.5% etc.
If you learn these ratios then you can very quickly determine the gross return and know based on current rents for the area whether the property in question warrent further investigation.
Cheers
].
] KP [
]. The benefit of this is you can pay the property off quickly (approx 10 years) from rental income without putting any of your own money[
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