Hi I am new, I just bought Steve’ book last Thursday, and finished reading over the weekend. I have a question here.
If I don’t have cash deposit, but borrow 110% from bank to invest, does the CoCR serve any purpose?? I mean what does it mean the the CoCR is equal to “#DIV/0!”, since the Cash outlay is “Zero” ??
Do I still have to do this CoCR exercise? Or as long as the property passed 11second, then I am safe to say the property I am getting is possive gear???Sally
Hi Sally,
The CoCR percentage is not that applicable when you are borrowing so much. At the end of the day you need to have a +ve cashflow and need to know it will remain +ve for as long as possible.An infinite CoCR, which is what you are doing is not that great if you only make $1 per annum, is it?
Steve’s 11 second rule should only be treated as a guide or “rule of thumb” in order to identify good properties. It works under current interest levels but I doubt it would if you had double digit interest rates.
If the rental of a property is fair and sustainable, and it covers your rates insurance, r&m and mortgage repayments and you still have some left over at the end, then your on your way.
Hope this helps
Cheers
Jeffto make the COC figure meaninful, why not asssume you are paying a 20% deposit.
Terryw
Discover Home Loans
North Sydney
[email protected]Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
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