Hi
I vaguely remember Steve McKnight give an example of how to work out how many houses with X amount of rental return you would need to earn X dollars.
Is there a way to calcualte this or is there a formula somewhere on this website. I can’t remeber where I have seen it written, whether it was on this website or in one of Steve’s books.
Does anyone know what I am referring to?
ThanksMaria,
This has been covered many times before, have a flick through the search function.
The formula is X x Y = XY, which everyone learns in Year 8….it’s not new.
Work out want you want for XY and go from there.
If you want $ 1,500 p.w. to live off, and each house produces $ 20 p.w. free cashflow, you’ll only need to own and manage 75 houses…sound attractive ??
Cheers,
Dazzling
“No point having a cake if you can’t eat it.”
Thanks Dazzling
I somehow thought there was alittle more to it than that.
I do remember my year 8 grade mathsHi maria
like dazzling i wouldn’t be interested in 10% properties that return $20pw (if lucky) but what if you could buy homes that put $50pw in your pocket. Then using dazzings example 75 properties would produce $3750 pw or $195,000 per year. You could employ someone to do your management of the portfolio.
ok now if these 75 homes were worth $55,000 that would make your portfolio worth $4.125 million. Now if you had a little capital growth, say 5% per annum then thats an extra $206,000 per annum capital growth. sound attractive ??but you can’t do this in Oz to my knowledge or NZ (where i’m now living). But it is possible.
regards westan
We find cash positive deals showing 15-25% Returns in the USA email me at [email protected] to join our database
Property goes up in value by 7 percent p/a averaged over the longer term. To work out a future income you need to add the CPI figure to your today figure of required income every year and 7 percent every year for your property value and work out a yield based on probably 4% of the property value. A spreadsheet in excel can forecast this based on a per year over a number of years time frame.
Duckster why do you suggest using a fixed 7% pa for house price inflation but a floating index for consumer price inflation?
Are you suggesting that there is no relationship between the two?
Why would the yield be 4%?
I’m not having a go, just curious as to how such results are arrived at and whether they are useful.Regards, F.[cowboy2]
Duckster
4 percent yield??When your yield is less than your interest costs you would be relying solely on capital gains to arrive at an X dollar figure – to me that’s specualtive.
Unfortunately a 7 percent increase in property prices is not consistently achievable year in and year out. While I appreciate you did say “average over the longer term”, I for one would hate to be negatively geared for any lengthy period and relying only on capital gain.
Maria
“How many balls of string does it take to reach the moon?”Cheers
JeffIts always best you formulate your own method that is unique to your own circumstances.
Although steve formula is a great gauge, it can be misleading to another persons particular financial situation.
It is best to buy as much as you posibly can, and if you can manage to find cash flow postives homes that are not located in the middle of nowhere, then please fill me in…
Cheers – Great to be back – miss me?
Cheers
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