Hi everyone,
As I understand the 11 second rule you divide the expected weekly rent by 2, times that by 1000 and then compare that figure to the asking price of the house.
Is my application of the rule correct if I then disregard any property where the calculated figure is less than the asking price?
Eg.
Weekly rent $200
Asking price $90,000
= Good DealWeekly rent $200
Asking price $110,000
= Bad DealObviously this rule discounts any other factors such as capital gains (or have I missed something?)
Thanks,
DaveThat’s the gist of the rule – but remember it’s a rule of thumb.
Personally, I don’t use it that much because the kinds of properties that fit this criteria are not what I’m looking for (ie not the bargain basement).
I’m also from the “factor in the depreciation” school of thought, which makes a difference.
Excellent.
Thanks for your help.
Dave11 secs is just use to help you to work out if it is +ve cash flow property without having to carry your calculator around. eventhough it’s fix the 11 secs soln it’s still does not mean +ve cash flow all the time.
Warm Regards
ChanDollars
[Keep going, you’re nearly reach the end of financial freedom]dvane said:
“Weekly rent $200
Asking price $110,000
= Bad Deal”yeah, dvane- that’s a shocker deal. Only a loser would do that one. Where is it, by the way? I’m a bit of a loser myself
I have no idea where there are 110k properties yielding 200 bucks a week.kay henry
I would not expect many properties to come even close.
I have one which was spot on the 11 sec calc but I would think this would be near impossible in the cities.
Why not just think ok price is 100k, 200k whatever and rent must be double per week, that`s my one sec rule!.
For instance a 100k property would need to rent for 200 per week and so on.
Seems this would be more realistic and even more simplified.
This is generally the way I always did it.
But of course position and potential play too a big part on buying a home to get carried away with set guidelines.Hi guys,
If a property is $110k and rents for $200pw, dont just dismiss it, find out more about this property, it might be able to claim a depreciation, even on an I/O loan the property might give +ve dollars back in a tax rebate. There are also other little factors that can make a -ve cashflow property into a +ve cashflow property.
Cheers,
sisObviously our marketplace is more of a hay stack than when Steve & Dave came up with this litmus test. But the important fator is that the 11SR is to help identify properties with a 10.4% rtn, as this was there minimum return they would accept on a property.
Now that the market has changed, interest rates are going up this test needs to be adapted to your own requirements. But even as it is, it is there to help you weed out deals that will give cash returns from day one.
Markpatrick
I do the same thing as you as I understand what I am doing but for green eyed newbies the 11SR helps them to clarify what they are looking at.Cheers
Leigh K[]Carve your own path and lead the way …
sis, I would buy a 110k property that rented for $200 a week like a shot! Others might not, but I would
kay henry
Hi Kay,
I agree, me too [:o)],
Cheers,
sisHi to All,
I think that purchasing a property that is 110K and rent is $ 200 is not a bad deal but keep in mind that you are waitning for property appreciates in value (hoping) and if that is why you would purchase negatively or neutrally geared property that for me would be risky.
As we all know we can only guess and get roughly close to how much property will appreciate in value but if it stays stagnant for fe years or barely going up in value then you got yourself not making any money from day one.
Isn’t this what we all want people “Work less and receive more money” not the other way around Work more and receive less.
I wold rather buy property that is in more rural than central area as even thoug hyou are taking higher reisk with due diligence chacks you can quite easily make much more money in value going up in those areas as well pay them off quicker as you borrow less and of cource meaning could borrow more in much less time from the banks.
Cheers all,[:o)]
yeah michael- but if your property doesn’t appreciate in value, you only get an extra $5 a week in your pocket. Gonna take a lot of those $5 a week to retire.
kay henry
I have no idea where there are 110k properties yielding 200 bucks a week.
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