Hello,
I am currently reading Steve McKnight's book 0 to 130 Properties in 3.5 Years. I understand the calculations of the 11Second Solution and how it's being used to determine whether or not a property will return a passive income. What I do not understand is "WHY"?
Specifically, why is the weekly rent divided by 2? Why is that figure multiplied by 1,000? What's the significance of the 1,000? Why is it used as a multiplier?
Thanks,
Moses
Basically it gives a 10% yeild (roughly speaking).
So lets say a place rents for $200pw, if you multiply that by 50 (weeks), you get $10,000. If you bought the house for $100,000 then you get a 10% yield. If you factor in about 7% interest, 1% costs, some maintenance or whatever, then you still should make positive cashflow. So in the above:
$200/2 = 100
$100 x 1000 = $100,000.Now obviously you get 52 weeks in the year, and 10% isn't the exact amount of yeild you need to be +VE cashflow, but its a quick rough guide. For instance if the property above was for sale for $180,000 then its not even close (unless you can see some other way to get more than $200 pw rent). If it was $125,000 then maybe its worth taking a closer look at.
Bare in mind even Steve says the days of finding residential property that meet the 11second solution are basically gone now.
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