Have just purchased ID – can someone give me info on what the 11 second rule is and how is it applied…?….
MIKALA
Hi Mikala
Below is a description of the 11 Second rule from the help in ID, you can press F1 from almost anywhere to get information about the ID feature you are using at the time.
The basic calculation for the 11 Second rule is (PROPERTY COST / 1000) * 2, this will give the minimum rent required to return a positive cash flow.Equally, (RENT / 2) * 1000 returns the maximum purchase price for the property to return a positive cash flow.
These figures equate to a gross rental return of approx. 10.4%
This calculator will return either figure as well as evaluating how close to the 11 Second rule the figures come.
The 11 second rule is a quick way to do the basic sums in your head when your out and about or browsing the paper or internet.Hope this helps
Regards
Philip Batey
JATPAC DesignsAuthor of Investment Detective
Hello I am currently reading the second book “$1 000 000 in property in one year†it is on page 9th
“The 11 second solution is a basic guide to quickly calculate – based on the weekly rent – a purchase priced that equals 10.4 % per year.
1. Get the current weekly rent
2. Divided the weekly rent by 2
3. Multiply the result by 1000
4. if the price of the property is less or equal to the result of step 3, you may have found a property that is positive cash flow.Hope this helps, I recommend you to read the books, They are very interesting and give you a good idea of what this entire concept is about.
Hi Philip and Mr. H.E.C.B.,
Thanks for your replies and the book sounds like a good read…
MIKALA
Hi All,
Just wondering if the 11 sec. rule should go under a slight amendment since interest rates now are around 4.5% (Ubank, me home loan and tic toc home loans)????
Thanks,
DanielYou’re right Dan – it definitely would need significant adjustment. These days a yield of ~6% should produce a cash neutral/positive scenario with most properties. The ones which will throw it off is on the ongoing property costs outside of interest expenses – ie strata, maintenance, water/council etc.
Corey Batt | Precision Funding
http://www.precisionfunding.com.au
Email Me | Phone MeInvestment Focused Finance Strategist - servicing Australia-wide
Agree with Corey 👍😎
If you want a quick formula (let’s call it the ‘6 seconds rule’?), here it is:
“(Purchase price/1000) + 10%”
Example:
$500k purchase (side note: personally I like to calculate the purchase price as ‘the real purchase price’ which is ‘purchase price + 5% purchasing costs’), so:
500,000/1000 = $500. Adding 10% brings it to $550k rent which is 5.7% which should cover expenses (but only if your mortgage is IO!).
Hope this helps?
Happy new year! 🎉🎉👍😎
EthanEthan Timor | Aligned Finance Pty Ltd
http://www.alignedfinance.com.au/
Email Me | Phone MeActive Investor & Broker; Based in Northern NSW, servicing Australia wide; Author of '34 Proven Ways to Maximise Your Borrowing Power' (download free from our website)
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