Please, can someone explain how exactly to do it.
I had a go last night but I think I am missing something?Thank you everyone.
TessHi Tess,
Here goes.
If you see a house that you know rents for say $160 per week.
1. Divide the weekly rent x 2 = $80
2. Multiply $80 x 1000
3. Answer is $80,000If the price of the house is $80,000 or less, the chances of it being +ve cashflow are very good.
It’s only a filtering tool, and not the only thing to consider.
Remember, some properties that pass this test, still are not +ve cashflow, as they may have high management fees etc….
Its a useful formula and a good starting point.
Hope this is clear.
Del
hi
take you weekly rent divide it by 2 and multiply by 1000 – that shld be the price you willing to pay
ie weekly rent 150 / 2 = 75
x 1000 = 75,000cheers
Thank you so much guys.
Now I can see why it is difficult to find properties like this. Most of them don’t past the first test.Would you agree that we should be looking in outer suburbs of major cities?
Can someone share suitable suburbs in Melbourne?
Cheers
TessTess,
It’s a bit hard finding suburbs that fit the 11 second solution thesedays.
You will need to further afield. Look at the larger regional towns. There are lots of them.
Ours are mostly 400kms away from where we live.Good luck,
Del
tess – im from melbourne also
you really need to be looking at small country towns atleast 200k from melbourne owise they wont cut the mustard.
alternatively try new zealand (im serious)
see other threads on new zealand.
one thing ive learnt from this forum is that you need to be able to cast your net widely in order to find +ve cashflow deals.
cheers
del – youre always 1 minute b4 me – maybe thats why yr in the money and im not – lol[
]cheers
Hey Aussie,
You’re funny!![
][]“The early bird catches the worm. If you’re too slow you’ll just catch a cold”!!
Catchulata,[
]Del
if you snooze you lose!!!
[
]“Success is often just hanging on, after everyone else has let go!![
]– That one took a bit longer..
Alternatively, divide the asking price by 1000, then multiply by 2. This will give you the minimum rent to achieve +ve cash flow (following the 11 sec rule)
eg. Asking price $90,000
Rent = $90,000/1000=90
= 90*2
= $180look before you leap
I have my own, similar rule
if weekly rent is the same as property price in thousands, eg
rent $150
price $150,000the yield is 5%
50 x 150 = $7500. 7500/150000 = 5%
most properties I see now are 7.5%, eg $100k & $150. When I see rent is $200 and asking price is around $200k, I laugh and run.
I do have a few concerns about going out and looking for properties.
1) It is all great but I suspect in these areas the chance the properties to be vacant are greater then in the cities. What do you do if that happens?
2) It seems to me it is a bit catch 22. If you want to get loan to start you have to have income (steady one) so the bank will lend the money.
In our situation my husband and I are already in the higher bracket for taxes so every positive cash flow we get will be half taxed not much profit will be left for us.
Is there are other of you that are in the same boat, facing the same dilemma?
Do you think we should think in this case for negative gearing or may be I should stop working?[]Cheers
Hi Maggie,
Yes we are in that high tax bracket dilemma! (If it is in fact a dilemma)[
]. We have our own asparagus farm.One thing, it allows you to get multiple loans.
As far as the paying more tax issue, the way we look at it is you have to be earning $1.00 to be paying 48.5 cents tax. Therefore we’re still ahead. Most of our loans are P&I, so ultimately one day our assets will be building, with slightly higher income.
Our IP’s are now in a separate Trust structure, so we minimize our tax as best we can. The rest is up to our accountant to do what he is paid to do.
As Steve says “if all you do is make money, then you must make money”……(hopefully)
Del
Thanks Del,
Do you have properties that give you negative gearing or all are +flow?
How many do you have and how many years since you started investing?I am not sure if we should go for only + flow or have both?
Cheers
Maggie,
Even though you are both in a higher tax bracket, don’t let this stop you from increasing you property portfolio as you can decrease you normal job slowly and then both of you can eventually stop work and become fulltime property investors and not be tied down to the typical JOB.
The only thing that negative gearing would do is keep you at work to pay for the properties.
In regards to having vacant properties in regional areas, you need to do your homework and visit the places you are considering, and talk to the real estates and locals, then you will get a feel for the environment and whether it is worth pursueing in that area.
Del, I’m hanging on, while everyone else has let go!! [
]See ya later
BeckyInvest in People for a Prosperous Future!
I,m in the same boat and I struggle to work out how to make Steve’s system work for me. If I’m -ve geared every dollar I lose I claim half back. if I’m +ve geared every dollar I earn I lose half to the taxman.
Becky,
Good girl!! See ya next week.
Maggie,
We only started investing late Feb this year. We will only ever (at this stage) buy cashflow pos. properties. We have 2 houses and 1 block of 4 units. Due to settle in 2 weeks we have a house and a block of 5 units. We have only started out.
If you are hoping for multiple properties, basically you have to keep getting cashflow pos. ppty’s. Each -ve geared one will limit the amount of borrowing.
I understand your theory, but unfortunately it doesn’t seem to work that way. We possibly feel that one neg geared ppty would reduce our tax bill quite a bit, however, it’s not worth it for us, as we want to sell our asparagus farm one day soon, and just do property. When we do that we’d be stuck paying off the neg geared one out of our pos geared ones, and be left with no income.
It’s a bit of a viscous (spellcheck) circle…
At the moment, we’ll just concentrate on building up our properties, and worry about the tax later.
Del [
]r2dee2,
Would you rather work all your life to get a small tax break?
or
Pay tax on heaps of properties that has made you financially free?That’s the question I have asked myself and money’s on option B…..
You need to first work out what you want out of life…..before you can decide which path to take.
Becky
Invest in People for a Prosperous Future!
]
]
]
]. We have our own asparagus farm.
]
The topic ‘11 seconds solution’ is closed to new replies.
