Hi Folks
Just wondering from you folks that are longer in the tooth! (as far as investing goes of course[
]) What amount of variance can one play with after the 11 sec sol has been applied?I just wanted to find out the why is it so aspect, I think people have asked before but I haven’t seen the answer to what the divide by “2” represents and does 1.5 or 3 make a difference or have any relevance.
Maybe Steve, would be so kind as to shed some light.
Cheers
Leigh K[]“If you will take on your self-doubt and laziness, you will find the door to your freedom.”
-Robert KiyosakiHey Leigh,
When divided by two the property gives a 10% gross yield. This is a sum that is thought to be sufficient ( in rough calculations) to cover all costs and put money in your pocket. Saying this it is merely step one. For example if you found a property for $85000 that was $20000 under valued and the rent was $160 would you pass it up ??? Maybe for some and maybe not for others.
Thsi rule is a great filter that gives you the chance to quickly scan sales and find properties that are close to a 10% yield and therefore cash positive.If you found properties where dividing by 3 works all the better as this only increases your gross yield.
Hope this provides a little clarity.
Enjoy
AD [:0)]
(Andrew)“”Imagination is more important than knowledge. Knowledge is limited. Imagination encircles the world.”
Albert EinsteinAs 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%Don’t be a silly billy and pass up on something just because it doesn’t work out to be exactly the “11 second solution” or “10.4%”.
Thanks guys that really does help to clarify the situation.
Kind regards
Leigh K[]“If you will take on your self-doubt and laziness, you will find the door to your freedom.”
-Robert KiyosakiHi,
For these positive cashflow properties that have no/low capital growth. Why would an investor purchase it if vacancy and bad tenants can be an issue. Eventhough theoretically you do get a good return, but you still need to consider if you don’t get rent or damage occurs. Also, if the property is too old, there is no depreciation you can claim.
Hi jg1234
For these positive cashflow properties that have no/low capital growth. Why would an investor purchase it if vacancy and bad tenants can be an issue. Eventhough theoretically you do get a good return, but you still need to consider if you don’t get rent or damage occurs. Also, if the property is too old, there is no depreciation you can claim.
It is only my opinion as each to their own strategy, but … I will be happiest to have investment properties pay for themselves and give me a pay check too rather than go to work to give my pay check to the bank!Leigh K[
]“If you will take on your self-doubt and laziness, you will find the door to your freedom.”
-Robert Kiyosaki
]) What amount of variance can one play with after the 11 sec sol has been applied?
]
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