I am about ready to give up and join all the other non-aspiring investers out there by buying a house that will rent for half of the purchase price ( less the 3 zeros at the end). I have looked at house and rent values in approx 20 – 30 rural towns in 3 states and nothing comes close to the 11 sec rule. A few questions
1) am I going about the search the wrong way??
2) how is every body else deciding on an area, other than the obvoius, potential for growth, population, employment etc..?
3) with a market so hot how is it possible to buy a place below value, no one will acceot offers because someone will come along the next day and but it, if you don’t.
4)for pos. C. F. properties, it seems as thou it will only work if you can find a property valued at below 80K, at least it is reasonable to assume you will get about 160 rent, but if you buy at 200, as if you would get 400 rent?
5) I realise that this type of investing does not come and find you and it require hard work researching, but I live in Sydney with a young baby and I spend hours on the internet and on the phone and on weekends we go driving, I even flew to Cairns, I am still unsuccessful and My loan expires in 6 weeks. any advice anyone??????Taylah,
Drop me an email vmax at bigpond.net.au
Cheers,
Battz
hi taylah,
firstly I wouldn’t call Cairns a rural town….
yes you are right about the lower end of the market, in my experience the better returns are found there.
It sounds like you are looking for +ve CF properties in the places where you find negative geared ones.
If you are ‘deciding on an area’ based on “growth, population and employment’ then stick to capital cities and forget about +ve CF.
Why not try ‘deciding on an area’ based on the numbers. It might not have a large population or much in the way of growth, but it might be a brilliant place to buy a +ve CF property.
I mean, if you can get it all in the one property, well and good, but I’m just trying to say, don’t buy (i.e.) beachfront and expect it to be +ve cashflow
Hi taylah111
Don’t look at the obvious either, I found a block of units for sale in Armidale far north NSW, 13 units and 5 storage sheds.
On the surface the deal looked like this
13 x (approx) 110pw = $1430/2×1000= $715k
Asking price $675k not bad so far, the 5 storgae sheds were also renting for $150pw each
So now we have 1430 + (150×5) 750=2180/2×1000 = $1,090,000. now thats a deal.Properties can have value other than rent, I am buying my 3rd property in 4 months this week, they all meet the 11 sec sol exactly. They are out there.
I pick my towns by doing a general search on Realestate.com for the cheapest houses and see where they are … then I research the town to see if it meets my criteria. It would be nice if they were all in huge towns with no risk but reality is always different.
Good luck
Leigh K[
]Carve your own path and lead the way …
there are plenty of +ve cash flow properties, just keep searching, i swear i find one in every search i do, and i havent searched in a week only reason is causei have to wait for some more finance.
look harder
Taylah
What is wrong with property under 80K? If you buy 2 that 160K invested positively etc. I guess you have to add stamp duty etc but the figures can work out.
Good Luck
dun give up, keep searching they are there, a diamond in the bush. i found few and getting finance pre-approve now, as the deals all sold in less than 1 weeks. keep in touch with the RE agent on the areas you are intending to invest, so something comes up they can inform you.
good luck
hi Leigh
that doesn’t sound right about 150pw for a storage shed. perhaps you have misunderstood and it is 150pw for all of them??
taylah
yes it is real hard to find deals at the moment, i’ve given up looking in Vic. haven’t bought anything since about june. but i’ve been buying elsewhere and bought 12 in the past 15 weeks, so you need to look harder. personally i am not happy with the 11 sec rule the return is too low. all the ones i’ve bought in the past months have been better than this.
regards westanQuote:hi Leighthat doesn’t sound right about 150pw for a storage shed. perhaps you have misunderstood and it is 150pw for all of them??
taylah
yes it is real hard to find deals at the moment, i’ve given up looking in Vic. haven’t bought anything since about june. but i’ve been buying elsewhere and bought 12 in the past 15 weeks, so you need to look harder. personally i am not happy with the 11 sec rule the return is too low. all the ones i’ve bought in the past months have been better than this.
regards westanHi Leigh,
12 properties in 14 weeks is exceptional progress! I am curious as to whether you had a lot of capital before beginning or whether some of the deals were no money down deals?
Regards
Nathan
Taylah,
I bought a property for $116,000 July last year. Rents for 150 per week. Does not meet the 11 second rule. [] However my hubby – the excel wizard – did the 12 month spreadsheet on it and without depreciation I am out of pocket on a P&I loan $28 per week. [] If I was interest only it would be cashflow positive. [] HOWEVER I kicked a $55 per week ciggie habit 5 months ago. [][][8D]Therefore I can afford two houses losing $28 per week as my reward.[^]
Fibejebe.
[]
TaylahWhat is wrong with property under 80K? If you buy 2 that 160K invested positively etc. I guess you have to add stamp duty etc but the figures can work out.
Good Luck
One thing i don’t understand when you people say you buy houses for 80K(example), is, how much work has to be done to them? I can’t see houses that are not falling apart for 80K…..therefore they would work out -ve geared…..
Quote:Hi taylah111Don’t look at the obvious either, I found a block of units for sale in Armidale far north NSW, 13 units and 5 storage sheds.
On the surface the deal looked like this
13 x (approx) 110pw = $1430/2×1000= $715k
Asking price $675k not bad so far, the 5 storgae sheds were also renting for $150pw each
So now we have 1430 + (150×5) 750=2180/2×1000 = $1,090,000. now thats a deal.Properties can have value other than rent, I am buying my 3rd property in 4 months this week, they all meet the 11 sec sol exactly. They are out there.
I pick my towns by doing a general search on Realestate.com for the cheapest houses and see where they are … then I research the town to see if it meets my criteria. It would be nice if they were all in huge towns with no risk but reality is always different.
Good luck
Leigh K[]Hi Leigh,
I dont understand part of your calculations. Where does the 2*1000 come from? I understand everything else, I just dont understand why you would divide the total rent by (2*1000) Its probably something basic I overlooked, so apologies in advance.
Regards,
Daniel.
Daniel
That’s how the 11 second rule works out the purchase price. It’s a filter that allows you to determine whether or not a property has a high likelihood of being cash positive.
Rent/2 * 1000
In this case the rent was 1430.
So to get purchase price
1430/2 = 715 * 1000 = $715K.At $715K, the property will be returning 10.4%. Should be cash positive on these figures.
Cheers
Meli agree with westan, for me 10.4 percent (11 sec) is a *minimum* and I have achieved 20 percent with all my properties and intend to continue (if buying for cashflow.) No, they might not give me that much capital gain, and if i was hoping for capital gain (and in the future I might add some of those kinds of properties) – who knows, I might settle for a neutrally geared 10.4 percent. but i wonder if now is the right time to be buying for capital gain anyway – things are booming.
then again if you can get CF+ve in today’s market, and you are intending to hold long term and you are unlikely to have to sell in a hurry, i believe you can’t really go wrong.
i agree with westan, for me 10.4 percent (11 sec) is a *minimum* and I have achieved 20 percent with all my properties and intend to continue (if buying for cashflow.) No, they might not give me that much capital gain, and if i was hoping for capital gain (and in the future I might add some of those kinds of properties) – know knows, I might settle for a neutrally geared 10.4 percent. but i wonder if now is the right time to be buying for capital gain anyway – things are booming.
then again if you can get CF+ve in today’s market, and you are intending to hold long term and you are unlikely to have to sell in a hurry, i believe you can’t really go wrong.
Forgot to say Fibejebe – congrats on quitting smoking!![
][][8D][][]Cheers
MelThanks Mel,
$1100 better off so far. Now that’s what I call positive cashflow![]
Forgot to say Fibejebe – congrats on quitting smoking!![][][8D][][]Cheers
Mel
TaylahWhat is wrong with property under 80K? If you buy 2 that 160K invested positively etc. I guess you have to add stamp duty etc but the figures can work out.
Good Luck
NOTHING is wrong is property under 80K, I just can’t find anything that cheap, thats my question, do they exist?
there are plenty of +ve cash flow properties, just keep searching, i swear i find one in every search i do, and i havent searched in a week only reason is causei have to wait for some more finance.look harder
Dear still in school,
what are you searching, is their a site that searches for cheap properties and brings them up all in different areas, all the places I go to you have to type in an area, and this is where I go wrong because every area I put in is no good.
]
] However my hubby – the excel wizard – did the 12 month spreadsheet on it and without depreciation I am out of pocket on a P&I loan $28 per week. [
] If I was interest only it would be cashflow positive. [
] HOWEVER I kicked a $55 per week ciggie habit 5 months ago. [
][8D]Therefore I can afford two houses losing $28 per week as my reward.[^]
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