Hi all,
“The 11 second solution will always provide a gross return on investment of 10.4% per annum”
How does it do this>
1. Ascertain the likely weekly rent (no problems there)
2.Divide the weekly rent by 2 ( I assume we do this because you will lose have the rent in taxes/management fees etc?)
3. Multiply the result by 1000 (no idea why you do this)
If someone (especially STEVE) could clarify the rule for me that would be great.
cheers,
Andrew
Andrew, I know I’m not Steve, but I’ll try to answer your question.
To get a rental return of 10.4%, using a calculator, you would take the purchase price, eg $134K., and multiply it by your required return (10.4% or .104). Divide the answer by 52, which gives you your weekly rent.
So 134000*.104/52 = 268
The 11 second solution is a ‘formula’ you can do in your head to come up with the same result. so don’t think of ‘halving’ the rent because of any costs etc., it’s just a way to come up with your desired purchase price.
Hope this helps.
Cheers
MelHi Andrew,
What Melbear Explained to you is completly correct. Melbear explaination, gives you exactly what the 10.4% GYR should be as what rental should be recieved everyweek.
Here is another way to work out a 10.4% gross yield return.
Purchase Price $75,000
Annual Rental $7800
Weekly Rental $150pw x 52For the 10.4% Return.
Annual Rental / Purchase Price X 100 = 10.4%
===============
Doing it this way, you are able to see what your GYR will be if the rental is higer or lower in weekly rental returns.
cheers,
s.i.sI’m looking at buying property in the USA that shows a 15% rental return. Has anyone had experience with this sort of investment in the past? <snip – Derek>
thanks, Andrew.
Hi Andrew,
The idea behind the 11 Sec Solution is that a 10.4% gross return should be high enough so as to leave you with some net positive cashflow after property expenses have been deducted.
There is no guarantee though, particularly if there is more than 80% borrowing.
As far as the maths goes, it has been well explained in this post.
Cheers,
Steve McKnight
**********
Remember that success comes from doing things differently.
**********Steve McKnight | PropertyInvesting.com Pty Ltd | CEO
https://www.propertyinvesting.comSuccess comes from doing things differently
Hi,
There is mentioned on a revised 11 second rule ‘mark 2’ for the change in the marketplace.does anyone know the ‘new’ formula?
rgd
Michellej
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