I have just started to read Steve's book "From 0 To 130 properties In 3.5 Years" and, while a long way from finishing, I'm lost already.
Here's my problem so far. Steve talks about a positive cashflow and having the property gebnerate income from day one. I'm fine with this concept, but he then gives an "11 Second Solution" to quickly find properties that are likely to achieve this goal.
Now, looking briefly in a few rural centres in NSW (Orange, Bathurst, Dubbo) it looks like nothing achieves this magic formula. They are all too expensive for the rental returns to generate this magic number. Am I looking in the wrong areas or has the market changed so much since Steve wrote the book that this is no longer possible?
Any guidance from those that have been down this path before?
TIA
Sorry to say, but this method of calculating potential properties was relevant when Steve first started out back in Ballarat, but not now.
You have to look below the surface these day. Find "add value" properties and ones that have very high depreciation deductions. This means start with only looking at older properties that have been recently renovated, or have been built after 1987.
The problem with recently renovated homes is you won't usually get them cheaply. The vendor has spent good money and expects a good price.
Better to look for post 1987 houses that need a reno. You can add value, increase the rent, depreciate a great deal of the building and fittings. This might get you over the line with the 11 sec solution, but only if the rent return is pretty good as well to start with; say; around the same as the current finance rate or better.
Or, you could try wraps and stuff like that. I can't help you there, but there are some on this forum that do them.
L.A Aussie wrote:Sorry to say, but this method of calculating potential properties was relevant when Steve first started out back in Ballarat, but not now.Thanks for your response, that's what I was afraid of. So, in realirt, a positively geared investment property is not really achievable in this market.
Glen
positive cash flow properties are out there in the market they just very rarely adhere to the 11 second rule. you should read steve's next couple of books to explain this in more detail. but you have got to manufacture them. eg add perceived value live turn a two bedroom into a 3 bedroom to increase the rental yield.
GlenR, there are two possibilities:
– the 11 second rule was once useful but is now broken and will never again work.
– the 11 second rule always works, but the houses you're looking at are overvalued.My vote is for the second, but I understand that many others disagree.
Cheers, F. [cowboy2]
Just curious, do you invest in property foundation?
foundation wrote:GlenR, there are two possibilities:
– the 11 second rule was once useful but is now broken and will never again work.
– the 11 second rule always works, but the houses you're looking at are overvalued.My vote is for the second, but I understand that many others disagree.
Cheers, F. [cowboy2]
I agree F,
but rather than a massive correction on prices, I think the normal procedure will prevail – the prices will stagnate until the wages catch up and affordability improves.
Of course, as affordability improves so does demand, which forces up prices. Maybe we will not see affordability improve until finance becomes very high (I hope this doesn't occur).
Then we have affordable houses, but no-one can afford the repayments. Around and around we go.
By the way; did you manage to find out the average cost of a house in 1901 compared to 2001?
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