I'm trying to get the 11 second solution to work but it just seems to make the rent way out reach for almost every property i have looked at. I'm new at the property investing game. some help would be nice
That is because finding a CF positive property is difficult.
Generally the rental return on a property is about 4-5%.
The 11 second rule is looking for a return of about 8%
You may need to think about buying cheaper
I too am new at the investment game. I have found a property which would make a positive cashflow but the problem is it is in a very rural area that would require more than a day to drive there… Is it too risky to buy a property that I haven't even seen (apart from pictures) – I really can't believe I am thinking of it – but the numbers look really good.
The property is less than $100k (and would return more than 200/week) – does anyone have any advice whether I should get an interest only loan that is fully tax deductible or should I pay the principle off as well?
Thanks for you comments…
You wont find the 11 sec rule around on anything decent these days. The sort of areas where you'll see it are dogs.
The only way you will achieve pos cashflow is to either create it through renovations, or subdivisions and building – adding value.
The other way is to look for POSITIVE CASHFLOW AFTER TAX properties.
This occurs when the cashflow is initially negative, but after you apply the tax deductions and depreciation to your earned income, your tax return increases the cashflow back to the positive. Because it is after tax; there is no tax to pay on the profit.
Read all Margaret Lomas's books to find out more about the strategy.
I have been looking at homes under $400000, Looking for properies that are priced lower then most for the suburb or town but most of the rents are around the $250 for $250000 house. so I'm a little bit stumped as to get a CF property
I have found that in order to get positive cashflow (11sec rule) you will generally need to purchase property further away in rural areas. Sure the area may not be good or the house that great for that matter but you are not trying to achieve capital gains but rather positive cashflow. These houses are generally less than $200k or more so less than $100k. they are out there… my problem is finding the time to do a diligence check on them..
Damo001,
Why not check this thread.
https://www.propertyinvesting.com/forums/property-investing/general-property/4323698
I started this a couple of days ago. Agreed about the places being rural, but I also think that for those without a great income, or those with other financial commitments (ie kids), that this type of investment is great. The investments can pay for themselves, and although not achieving a fantastic growth, they put little to no pressure on a family budget. These type of investments I think should definately be long term, so maybe work out your goal and if you want growth only, disregard the 11 second solution.
Good Luckg_man08,
Why not buy. Just make sure you do your due diligence and be aware that agents can over quote the rent return to obtain a sale. We own a place we bought nealry 5 years ago and have not yet seen it. I don't think we need too. It has been trashed (just under $50,000 worth) and it was easy because it is business,we have no attachment to the place at all. The only thing I found frustrating was during repairs contractors wanted to know what colour things should be. My response was always neutral, but this was not enough for some, so I asked the agent who leases the property to choose.
JLCheers JL. What about issues such as structural checks on the building? Did you get these done? Being positively geared I know its not massive money on the property but none the less I dont want to buy a dud – particularly as it is my first one. I have spoken to the owner of the property himself – and says that he rented it out for 250/week when he first owned it and since then has painted, put a new roof on and rewired the house. he intended on living in the rural area but that fell through so now wants to sell. I know I probably need to just take the leap of faith but want to be sure about it and not make an error as i was not diligent…
G_man08,
I would get a building inspection from a qualified builder – not just someone who says they can do one. I would also get a pest inspection. I would also get the home electrically certified after purchase and make sure there is a safety switch and smoke detectors. This is not all legislation in Vic, but more to proctect yourself and the tenant. As for security with not making a loss, I would also not just go with the agency you buy from, for property management. Make sure you are comfortable with them and you manage them. I make sure I ring every couple of weeks or more regularly to obtain a good working relationship with the agent. It helps to have the work done (eletrical stuff etc) when you first purchase by the agent you appoint. This gives you reason to ring and make sure they are doing what they have promised. It is also important to check the area you are going to invest? Is there job security in the region and is there a big enough portion of the community who rent to make it worthwhile (especially in rural areas). And don;t be scared of damage done by tenants, just protect yourself with insurance that is adequate.
And then, just take the leap.
JLThanks JL – valuable advice. Yeh the area I'm thinking of investing in is close to a lot of mine sites so shouldnt be a problem with job security. Ideally I'd like to rent it to a mining company.In terms of a building inspection and pest inspection- hopefully there are resources in the area… I'll have to investigate! In terms of property management … again a difficult point as there is no real estate agents in the town itself. The closest agents are about 2.5 – 3 hrs away. I have been in contact with an agent and they generally dont look after properties there – though they do sell them there….minor hurdles! I think I could get one to carry out inspections for me, but in terms of general management unfortunately I think I'll be on my own.
any other words of advice would be greatly appreciated! thanks,
g_man08Gosh – it sounds a little too rural for my liking. Although I only have one IP and definately no expert – just be cautious.
I recommend you have a look at Bairnsdale Victoria 3875. Some really good buys have been coming up on my property search a lovely 3 bedroom BV in a good older suburb close to amenities for $210kg_man08,
It does sound a little too rural. I have a place that is rural but it only takes a bit over 1 hour from a major centre. I have been waiting 3 weeks for A/C to be put in and expect it to be done this week. This is not excessive, but what if it was a hot water service or something? Tradies won;t go and do quotes, just turn up to do the work, so be careful you are not too isolated for even the most basic of repairs. You also have to work out how you are going to find a tenant from remote location and if you do have a property manager the fees will usually be a lot higher than for a less rural property.
JLg_man08,
Too risky I agree. It's only pos cashflow if you have a tenant. Otherwise YOU are paying the bills and interest and it becomes a major liability. It may also be more difficult to get finance for this remote property.
Be Careful,
Ian
ps: do some reading and research of successful investors before you jump in – there are plenty out there with different strategies. Get the latest Australian Property Investor magazine and you will find plenty of books in the back section.
just found a website called www. cashfowcapital.com.au. Anyone used it before, good or bad
Hello
Asking about the 11 second solution is just another way of asking about CF+ properties.
Just in case you haven't stumbled onto this thread which someone kindly started to help new forum members.
https://www.propertyinvesting.com/forums/property-investing/help-needed/22508
Cheers
Elka
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