hi i am pretty new to the property market and i was applying the 1% rule to a property out at young (past bathurst) when the roi result i used showed that it was a 11% return. just asking if this would be ok as a first investment property? any help would be great. thanks chris
Hi Chris.
I'm not familiar with the area, but I'd check the population trends (should be stable, but better to be growing) and talk to a couple of property managers to see if there is 1. good rental demand, 2. a reasonable type of tenant, and 3. double check the rent you have been quoted to make sure it is achievable. The nearest council website or real estate.com are also sources of interesting statistics for the area, such as employment, infrastructure plans, demographics.
Bye, G
Hi Palmer,
Can you explain what the 1% rule is. I am not familiar with that one.
Thanks,
Andrew
itsandrew
Go as far as you can see and you will see further.
Andrew
The 1% rule is one of the rules investors follow when looking for cash flowing deals.ie the Gross monthly rent needs to be greater than or equal to 1%of the annual mortgage cost. eg if your mortgage is $400k, does the monthly rent equal $4k per month (unlikely in Sydney!)? This and the 2% rule is mostly likely to work on lower priced deals, regionally or cheaper areas in general.
Cheers
Josh1% rule sounds more like the rule that I'd follow 1% of the time
HI Chris
Everyone’s situation is different, you would have lots more to consider than just the “1% rule”, that’s for sure. Have you read investing books? Lomas, McKnight, etc? and scroll through the forums here as well and you will find heaps of info, different scenarios and people who are generous with giving advice/sharing their point of view.
Thanks ambosh,
The one I am familiar with is the 11 second rule (i think that's what its called). on 400k property rent would need to be something like $3460 pcm. I find it hard to find a property that fits that (admittedly I've only just started looking again). 1% rule is a lot more conservative. Are either of these really a useful guide as a screening tool for CF+ properties?
Andrew
itsandrew
Go as far as you can see and you will see further.
itsandrew wrote:Thanks ambosh,The one I am familiar with is the 11 second rule (i think that's what its called). on 400k property rent would need to be something like $3460 pcm. I find it hard to find a property that fits that (admittedly I've only just started looking again). 1% rule is a lot more conservative. Are either of these really a useful guide as a screening tool for CF+ properties?
Andrew
Not really on higher value properties. You wont see many properties valued at $400k renting $3,460pcm (or $800 per week). It becomes even more unlikely as the values rise.
Tips In Investing A Property:
– Take a long-term view and realise that investing in property is usually a long-term strategy
– Positive vs. negative gearing
– Consider using the equity in any other property you own.
– Think about buying with friends, family or work colleagues.
– Choose a loan tailored to your current needs.
– Use a buyers agent/property finder
– Visit a financial adviser and/or accountant
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