HI
I am new here and just was reading some interesting info on this forum. I am just a little confused.
Just a few days ago, before even hearing about this book or or this sight, l went along to an auction to buy a commercial property. There were 4 going on sale in a very good position, with low/medium capital growth. I missed on buying one, because our price limit was lower than what they sold for. We decided to pay 200.00, but the one we wanted to buy was heading closer to 220.000. I stopped bidding at 217,000. It sold for 218,000. The rent is 253.00 per week.Going on the 11 second theory this would have been a good buy. But l would still have to pay an extra $70 per week out of my pocket for the property. Is this really a good investment? Did l miss out?Thanks Sue [
]g’day shezien
unfort it doesnt meet the 11 second theory.
at rent of 253 per week you shld only pay 125,000
for the property (at the most)cheers
where do you find those kind of properties??
They are impossible to find.
The rents are so low and the properties are too high.
Thanks sueAccording to residex, getting harder and harder to find.
The 11 second rule is:
(Rent/2)*1000
So in your case:
(253/2)*1000 = 126,500. So according to the 11 second rule, this is not a +ve property.
To get +ve properities, you need to look outer suburbs in major cities (but even that is rare) or regional areas.
The 11 second rule is:(Rent/2)*1000
So in your case:
(253/2)*1000 = 126,500. So according to the 11 second rule, this is not a +ve property.
To get +ve properities, you need to look outer suburbs in major cities (but even that is rare) or regional areas.
smee again
i stuffed up the last reply, twoz my first time.
re + cash flow or not
+ rent / a
– rates
-insurance
-maintenance
-vacancy
-interest
if you end up with anything left after that, it should be worth it.
don’t stop investing, just because it doesn’t match the 11 second solution.Remember it’s only a “rule of thumb”. It was never meant to be an acid test. Any rule of thumb is a guide only.
If the numbers stack up then go for it.
Cheers
Stu
Property & Finance News
at http://www.prosolution.com.auHi all,
If I’m not wrong, the 11 sec solution guide is to produce a 10.5% return on properties.
Whether you will want to accept 10.5% as the ultimate guide to buying properties is another matter altogether.
Am I right?
Hi,
I bought 4 in a regional city recently, average return will be 10% once they’re tenanted… I’m also confident of 5-8% cg for the next few years, going on previous cycles…
If both yield and cg add up to 15% then I’m happy enough.
Cheers
rg’day lawrie
you are right
i knocked back an opportunity showing 12 pct return (a few months back).
although the return was good it didnt meet the other criteria i had set.
cheers
The agents in Geelong and Bendigo laugh at me when I say that 5% is not attractive to me, and that 10.5% is the required yield.
Am I missing something here? Properties like that are considered as rare as the proverbial, so what is next in the thinking process? Cheers, Geoff.
geoff try another 200 km further north if you want to find them in victoria.
Yeh, the 11 second rule is just a guideline as already stated by others.
My brother found a property last week that passed on initial checks, but after rates/insurance/mgt fees etc it appears -ve…
Hi all,
I am starting to look at properties in the far north and south of NSW.
And I’m stuck in Sydney.
Thanks for the comments – an agent cautioned me away from the distant regional centres (e.g. the aforementioned 200km north of Melbourne) because rental demand is lower and capital return is much less. I know you can’t win on all fronts, but what experiences have others had in locating suitable properties? Cheers, Geoff.
geoff
remember this agent probably had a vested interest.
also remember that was what melbourne agents said about geelong and bendigo 2 years ago and their capital growth has outstripped melbournes in that time.
i think there are opportunites in all areas you just have to sniff them out – and they might not necessarily mean +ve cashflow bargains.
Hi Shezian – they exist, but seem to sell quickly (and maybe more quickly now with Steve’s book!).
I recently missed out on a 2br flat in a country town getting $105pw rent and costing $45k. I was willing to pay the full asking price, but, buying from interstate, I put in some subject to clauses (building inspection, valuer, pest inspection, property manager). This lost me the deal as someone else bought it unconditionally. Ah well – the price of prudence!
But was it that great after all? All the other costs soon eat into the 12% yield, eg $700 council rates, $500 body corp, $391 water, $500+ property manager, so you’re down to somewhere near 7-8%. For this place, costs are nearer to 40% than 25% of rental income.
Assuming you’re paying cash for the place, the after-tax return might be hardly better than fully franked Telstra shares at the moment, so I’m not that disappointed that I didn’t get it!
Peter
Stu
I,m new to this game, can I ask, when you evaluate a property initially do you use the 11 second rule , you say if the figures add up -go for it.
Do you mean the figures Investron mentioned and then hopefully end up with a +ve figure or do hope for a certain yield.trish
Hi Trisha,
Once you have got all the facts and numbers you should come out with a definite figure that tells you if you are +ve or -ve. From this value you should calculate you cash on cash return which will give you the yield. It is then up to you to decide whether the yield is high enough (you can do this by comparing to a term deposit or other investment opportunities). You should have a plan that states what yields you are aiming for and only invest in properties which satisfy your plan.
Hope that helps.
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