11 sec solution

” The 11 second solution says that if you take the rent, divide by two and multiply by 1000, this is the maximum you should pay for the property. “

For the benefit of the less experienced or aspiring investor ( including me ! ) I add the following. If life was as simple as an apple falling on your head, we could all be Rhode Scholars, by sitting under an apple tree in season and waiting for our number to come up.

I thought about the 11 second rule for about 11 seconds and then realized that man had developed another rule well before property investment came along. A rule that has stood the test of time and evolved with man over thousands of years. That rule is;

The Rule of Thumb ! An intrinsically evolved measure incorporating a range of human thoughts and considerations and experiences, that could not be encapsulated by such a simplistic formula on its own, without considering broader complexities that may have the potential to impact on the process.

More seriously though, I think the 11 second rule per say, is a phurphy, overly simplistic and at best an arbitrary measure not to be taken that seriously. If you look at the vacancy rates and other factors you find that the majority of properties fail this rule and then turn it on its head and people still make money from the investments. Quite simply it seems absurd, when considered in isolation to all other variables.

So I have a new rule, which is; Never spend more than 11 seconds thinking about a rule which took 11 seconds to devise. And then use your common sense and realize that there are so many more variables to consider, that will likely effect the viability of any property investment or any other type of investment or other life decision for that matter.

I would not be surprised if the vast majority of properties that meet this 11 second rule are in areas with poor if not negative capital growth. I doubt you would find many properties in areas of high demand that would meet such a rule.

Perhaps if you invested in an area prior to the commencement of a boom growth cycle, you may be able to find a property that meets this criteria. But I’m not convinced the 11 second criteria alone, could be solely relied upon as an investment viability benchmark.

I accept that the 11 second rule I suspect, is really meant only as a rough guide, and not be considered in isolation of other factors.

By the way, I have my fire proof jacket on, so feel free to flame away.

” Dare to question even the greatest ideas, as those ideas of most merit are the beneficiaries of such scrutiny, as are those who embrace them. ” dwh 25 June 2003

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Certainly I think we see beyond the 11 second rule.

I would prefer to see it as a partial filter or filter combinatorial element, that when combined and appropriately weighted along with other filter elements, contributes towards an overall threshold and hence assessment of the fitness of the sample.

I think we clearly agree on this aspect, as I expect Steve would also agree. None the less for the benefit of those less familiar with such matters, worthy of mention.