In my job as a buyer’s agent, I had someone offer a deal, and since I’m not a real estate agent, I can’t sell for them, but if anyone is interested this is the deal.
2 x caravans with solid annexes on permanent sites in Roxby Downs S.A.-population 5000 approx
$30k for both
One returning $170pw
Other returning $160pw
site fees $100pw eachAs there is no title, purchaser will need to have access to cash or ability to get a personal loan.
This vendor is highly motivated and creative – is happy to use them as a deposit on a purchase of another property.
Email Doug at[[email protected]] if you’re interested.
Hi,
Would the 11 second solution look like this? I’m not sure about caravans etc.
rent 160 + 170 = 330
Then minus 100 for site rental?
330-100= 230
230/2 = 165
165 * 1000 = 165000Have I gone wrong somewhere??? This is where an accountant is needed. I’m just a midwife [
]
Someone help []Sooshie [
]Cheers
There are no problems, only solutions
Hey Sooshie you are more than a midwife to all of us here.
The only poroblem with the maths that I could see is that $230 /2 =$115, so the final number is $115000.
Seems good returns but I would guess there would be a lot of due diligence necessary.Enjoy
AD [:0)]
(Andrew)“”Imagination is more important than knowledge. Knowledge is limited. Imagination encircles the world.”
Albert EinsteinHi Guys,
Not sure where I am going wrong, but I get a different answer:
11 secs
rent return 160+ 170 = 330
sight fees * 2 = 200rent less sight fees /2 = 65 * 1000
=
$65000[?][?][?]
Cheers, [
]Nathan
Sorry Nathan you be right I should have read more carefully. Shouldn’t stay up so late……
Enjoy
AD [:0)]
(Andrew)“”Imagination is more important than knowledge. Knowledge is limited. Imagination encircles the world.”
Albert EinsteinHey guys just thought I’d point out that the 11sec rule probably wouldn’t apply to this situation.
To purchase these caravans you would eith have to
a) pay with cash, in which case you would not have a loan to service and your return on cash investment would be approx 22.5%
b) purchase on a personal loan which would mean your interest rate would be 4-5% higher than a home loan rate so your 11sec formula would need to be adjusted
c) use a LOC (in which case the 11sec formula would work, but seeing as it’s a slightly differnet investment and things like expenses probably aren’t the same eg. no council rates, the 11sec formula may be a little off (probably for the better in this case).
P.S – On the 11sec Rule side of things, it seems, like many everything in life, people make simple things seem very complicated. Why not try the way I do it, let me call it the 2sec Rule!
If you know the rent multiply it by 500 to find out the desired purchase price (eg. weekly rent is $200 X 500 = $100,000)
If you have a purchase or asking price divide this by 500 to find out the desired weekly rental (eg. asking price is $100,000 / 500 = $200)
Or
For those who are pretty quick with their numbers, drop the ‘000 and double for finding out the desired rental (eg. $100,000 = $100 x 2 = $200)
&
Add ‘000 and divide by 2 to find out the desired purchase (eg. $200 = $200,000 / 2 = $100,000)
Afterall the 11sec rule is just a 10% return on the purchase price allowing for 2 weeks vacancy. Hope this helps [
]Oh, and the deal offered… Works well $$$’s as long as the due diligence stacks up and the purchaser has a way of financing.
11sec (or the 2sec!) rule works out at $65k for the combined purchase and they’re only asking $30k.
Hilary,
Are the returns offered permenant rental (with current tenants) or holiday rental? Also, is there any further managment fees involved if the tenancies are managed through the caravan park?
Thanks, Leigh
As far as i can tell, the 11 second solution is a 10.4% gross yield.
If you have a property worth $x and the weekly rent of $x is “double” this figure, it always works out at 10.4%. Examples:$262,000 = $524 pw = 10.4
$185,000 = $370 pw = 10.4%
$148,000 = $296 pw = 10.4%
$130,000 = $260 pw = 10.4%
$67,500 = $135 pw = 10.4%etc, etc, etc.
This is a very good yield for residential which is typically about 5%. Commercial is typically 10%.
If you see a yield like this on a residential, you can pretty much bet that you will have minimal/nil cap growth.
You should keep in mind that the “11 second solution” is someone’s way of calculating yield. You don’t have to be a sheep and be so pedantic about this “rule”. If it comes anywhere over 8%, i think it’s worth a closer look.
The “10.4% rule” is also only applicable with low interest rates, as it’s simply a yardstick to ensure CF +ive based on current interest rates.To calculate gross yield, divide the annual rent by the purchase price, and multiply by 100.
Example:
$9,426 (rent) divided by $127,500 and multiplied by 100 = 7.4%I call it the “10.4% rule”.
HI, Leigh.
As far as I know they are on 6 month leases.
they could be ideal as wraps too, if tenant could get a reasonable deposit?
Why don’t you send doug an email ?- he will have all the info for you.Well you learn something every day!! I’ve never heard of the 11 second rule but sounds quite interesting. All i can understand from this is there is a $30K outlay and after site fee expenses of $100/wk each, there sould be a combined rental income of $130/wk. In 50 weeks it would be $6500.00
I appologise if im wrong but 6500/30000×100=21.6% return. Subtract about 6.5% you will have to pay the bank, doesn’t that leave a positive casflow of 15%?? ie. app.$4500.Hi,
Thank you AD! I am very very glad you all responded and I was blown away that almost all of you had a different way of looking at things. WOW!
Thank fully, I don’t have to give medication often to clients [:0)] [:0)] [:0)], just a little morphine or pethidine here and there[
][], my maths is a bit rusty (I’m always posting late at night – early morning) Come to think of it, that’s when I do my Mid shifts [}]Okay, more seriously ( I obviously had too much sugar with dinner) The Caravans, sounded like a good deal, the 11 second solution stacked up, then of course due dilegence kicks in. Personally, I don’t like caravans ever since I went through the mattress bed whilst sleeping in a caravan in Tasmania (about 10 years ago).
This has been a very useful exercise and it was great to see your responses. I think I will use this as future reference.
Cheers
Sooshie[]There are no problems, only solutions
Hi All
I did my due dilligence and passed up on these two. There is a little more than meets the eye.
If you are serious about them and want to know more email me:
Simon [8D]
Hi,Simon.
Was intrigued as to what the problem was, and so looked at the site for rlm systems – it appears that you have something to do with defence contracts – does this mean that Roxby Downs has a problem? I must admit my first response was to ask if there was anyone alive out there?
Any thoughts from others in S.A.?Forget the dodgy caravans, if you can get $100 for a bit of dirt only big enough to swing a feral cat,multiply it by 20 or 30 permanent residents & now your starting to look good . Perhaps we should put our collective money in a tin and look for a caravan park . Trying to think big. ANDY
Hi there,
I tend to agree with Andy, think BIG (BIG is Good [
][]). Simon, please elaborate on how you think you can help advise people. This is an open forum and I’d be interested to see your viewpoint too[8D].Cheers
Sooshie [
]There are no problems, only solutions
Hi guys
just thought I’d throw this topic back up front for doug.
I’ve also done the due dilligence, and they are a good prospect, especially for someone in SA.
Thye are tempory accom for contractors new to the town, and as there is a shortage of housing in the area they are always tennanted, usually young families.
They come with a list of contractors in the area, who are a source of tennants.
I just can’t finance this one at the moment and Doug really wants to sell.
If anyone is interested email him at [email protected].Cheers
Scott“Aim for the stars and you’ll shoot the top of the telegraph pole. Aim for the top of the telegraph pole and you’ll shoot yourself in the foot!”
-anonThe 11 second rule was meant to apply to property and even then not on its own, but in consideration of a range of pertaining factors. So far as caravans are concerned, unless you know all the legals, I wouldn’t touch it with a barge poll.
What about tax and depreciation ? What about the fact that you don’t own the plot but you are leasing it, thus no capital growth, in fact the leasing will more likely go up in price over the years. In 5 years time no fool will want to live in a run down old caravan. They don’t have the shelf life of a house. Your asset will be worth scrap value in 5 years, with no land to appreciate, just a higher lease to pay for the caravan plot.
I would stay right away from that. In any event, I would be suspicious about the $170 a week for a caravan. You can rent a single bedroom unit for that in the outer suburbs. It just don’t add up.
And re;
” This vendor is highly motivated and creative – is happy to use them as a deposit on a purchase of another property. “
Clearly this vendor is creative enough to try to convince other suckers to buy into his dead end investment, but clearly smart enough to know that property is where its all at, hence his explanation and desire to sell.
Sounds very suspicious to me. I mean you must be kidding ! right ? [?]
There are no problems, only solutions and the solution is stay right away from this my friends.
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