Dear All,
Have just joined the propertyinvesting.com family having recently read From 0 to 130 properties in 3.5 years.
I am currently in the situation that I am negatively geared to the maximum. I would like to grow my property portfolio but find it challenging to source cash flow positive properties in QLD..??
The divide rent by 2 and multiply by 1000 rule would appear somewhat out of date in today’s property market? Is there another simple calculation that can be applied to today’s market?
Any tips would be excellent
Cheers
Jeff Aquilina
2 to 1 rule..if it is worth $100k it should rent for $200 per week
Please note even Steve has moved on from these deals, If you read his second book and his newsletter archives here you will get an idea of his recent results ;o)
A lot of +CF Investors are also looking in other countries
You really need to look overseas to obtain good positive cashflow deals. The closest country would be New Zealand where you can still obtain good cashflow in the main and some secondry cities. I have also been doing a great deal of work in the United States, however banks will only lend around 70% and property taxes tend to be high. However there are still good apportunities there.
Nigel Kibel
http://www.propertyknowhow.com.au
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Hi,
Following on from Rewing’s 2 to 1 logic, then if the house is worth $500K than you should rent it out at $1000 a week.
I have been following Steve’s 11 Second Solution and everytime I crunch the numbers the ratio 2 to 1 applies.
Now this is the stumbling block for me. Why would anyone in there right mind rent a $500K property for $1000 a week in todays market.
NO-ONE.The only you can own a $500K investment property and make it positively geared from day one is to use the 2 to 1 ratio upon yourself, not the tenant.
Example:
House Cost $500K
Equity Zero
Repayments @ 7% on $500K = $35000 per annum
Rent $500 per week * = $26000 per annum
Total = $9000 loss2 to 1 Ratio applied to yourself would look like this
House Cost $500K
Your Equity $250K
Repayments @ 7% on $250K = $ 17500 per annum
Rent $500 per week = $26000 per annum
Total = $8500 gain.* Using the method that the weekly rental price is 1000th the value of the property.
Cheers.
Why would anyone in there right mind rent a $500K property for $1000 a week in todays market.
NO-ONE.Oh I don’t know – lots of reasons I suppose….although I can’t tackle the “today’s market” comment, it’s far too broad and generalised to even make any sense whatsoever.
Some of the reasons why someone would pay $ 1,000 p.w. for a 500K prop, or a multiple thereof, might include ;
1. The property has a truss height high enough for their forklifts to operate in.
2. The driveway and rear yard are big enough for their semi trailers to turn around in.
3. The shopfront has the right exposure with the right amount of passing traffic.
4. The exit gate backs onto a Freeway entry exit point and therefore saves them alot of time.
5. They have existing operations next door and your property alone is suitable for them to store containers on.
6. They own the two other blocks either side of yours and wish to link up their operations.
7. They currently pay $ 1,500 p.w. and wish to move in to lower their rent.That’s only a few that come to mind in a few minutes. There are plenty more.
I’d suggest before right off the massive “property market” and all that it entails just because the housing market doesn’t deliver high paying residential tenants, you have a good look around the very diversified type of property one can invest in.
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