Hi All
If possible i would like some advice on the 1% rule (for cashflow properties) that Steve talks about on his recent webinar see link.
https://www.propertyinvesting.com/go/312
I am currently looking at a property that is going to auction & should fetch approx $280K. I have been advised that rent potential would be $290/wk. If i apply Steve's 1% rule it doesn't meet his criteria. ROI would be annual rent $15080 divided by approx purchase price $280K = 0.054 or 5.4%. Current standard variable rate is 5.74% (Commonwealth). We add the 1% to this & it is greater then the ROI which does not meet the criteria. ROI must be > then the variable rate + the 1%. Am i doing this correctly?This property has potential for subdivision with the possibility of 5 x 2 bedroom units down the back. Side access is available & block size is 1750m2. There are currently units built next door so i imagine council approval shouldn't be too much of a problem. Only disadvantage is the property backs onto a train line. How do i factor all this into the above equation?
Any comments & suggestions would be appreciated.
Thanks.
Regards
AnthonyFirstly the rule is a rule. Rules can be broken and bended to suit what requirement you need. Just because it doesn't fit Steve's 1% rule now, what about future redevelopment potential, annual rent increases etc where the rule might fit.
I understand exactly where you are coming from that some of Steve's rules dont always apply, but look outside the square and you will be surprised what you might be able to negotiate.I live in Perth and at one point I lived some 200 metres from a train line and we never noticed the trains until around 10pm or so. these are ambient noises which get amplified later on at night.
If you did redevelope the block look at extra insulation on the back units for sound proofing and many builders would/should suggest good building designs to limit this sound as well.Anthony, what are your investing rules?
Steve's 1% rule is great, but what is YOUR rule? What are your investing goals? Defining these will help you know if buying this is a good deal or not.
Do some goal setting, decide what you're looking for and then go hunting, because when you run across it you will know, because it will "tick all your boxes".
Vicky
Hi Anthony,
Do you think the rule applies if you add value to the property (allowing equity for reinvestment) and increase the rent?
– Look at properties in the area and see what kind of demographic the area is getting and what kind of changes to the property will give you the largest increase in rent or equity.
– Speak to property managers and see what the market is doing in the area and what properties are in demand and less likely to be empty.Good luck.
Cheers,
MiikePlaya Chicken wrote:Anthony, what are your investing rules?Steve's 1% rule is great, but what is YOUR rule? What are your investing goals? Defining these will help you know if buying this is a good deal or not.
Do some goal setting, decide what you're looking for and then go hunting, because when you run across it you will know, because it will "tick all your boxes".
Vicky
My rules: Location (well researched), potential (well researched) & price (well researched)
That is, find the area, get to know it, seek out properties which will be easy enough to improve (but not obvious to others) and know how much it is worth/what you are prepared to pay for it. Then negotiate.
Scott No Mates wrote:Playa Chicken wrote:Anthony, what are your investing rules?Steve's 1% rule is great, but what is YOUR rule? What are your investing goals? Defining these will help you know if buying this is a good deal or not.
Do some goal setting, decide what you're looking for and then go hunting, because when you run across it you will know, because it will "tick all your boxes".
Vicky
My rules: Location (well researched), potential (well researched) & price (well researched)
That is, find the area, get to know it, seek out properties which will be easy enough to improve (but not obvious to others) and know how much it is worth/what you are prepared to pay for it. Then negotiate.
Scott No Mates has the perfect rule.
Yeah GO YOU Scott No Mates ….
… but I thought we were all here on this post to make comments and suggestions that might help AnthonyS figure out a solution.
Vicky
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