Hi, I have found the 11 second rule easy to use, but not so easy to find a property as yet, early days though (only 2 so far!). Can someone tell me why we multiply by 1000? Or divide rental income by 2? Does this allow for 1/2 income to be taken up by expenses or what?
Sorry if I sound a bit dense, I’m new at this.
Kim
Sheesh! 32 people have read your question and 32 couldn’t be bothered answering it! Its just a simple way to multiply your weekly rent by 500. This tells you the cost of the property which would give you appx 10% gross rental return with that amount of rent. (10.4% to be exact, because there are 52 weeks per year, not 50)
Hope this makes sense Kim,
JHi,
I don’t think it’s that complicated – it just gives you a roughly 10% return which SHOULD be enough in most cases to be sufficiently cash flow positive to cover debt interest and other costs, thereby ensuring it’s an asset, not a liability!
Welcome aboard [
]Happy investing,
MelSorry guy’s I must be slower than Kimmy[:0)], I havent heard of the 11 second rule, nor could I make sense of the multiply my rent by 500[
], can someone help with my education.Many thanks.
the 11 second rule is explained in the book (0-130 properties….)
basically it’s about analysing properties for potential positive gearing in a small amount of time (11 seconds)
whether you divide the rent by 2 then times by 1000 or just times the rent by 500 you will get the same number (1000 / 2 = 500) it’s just easier to times something by 1000, you just add the three 000’s to the “rent per week” that has been divided by 2.
e.g. $100 per week divided by two is $50 per week, $50 x $1000 = $50000, thats a quick way of calculating whether the property will meet the criteria of 10.4% return pa.
[]many thanks, it sounds as if this topic has created a bit of interest, I noted that Tim has raised it as a question to the forum.[
][]
the 11 second rule is explained in the book (0-130 properties….)
basically it’s about analysing properties for potential positive gearing in a small amount of time (11 seconds)
whether you divide the rent by 2 then times by 1000 or just times the rent by 500 you will get the same number (1000 / 2 = 500) it’s just easier to times something by 1000, you just add the three 000’s to the “rent per week” that has been divided by 2.
e.g. $100 per week divided by two is $50 per week, $50 x $1000 = $50000, thats a quick way of calculating whether the property will meet the criteria of 10.4% return pa.
[]
]
], can someone help with my education.
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