All Topics / Help Needed! / Applying the 1% rule help :D

Viewing 11 posts - 1 through 11 (of 11 total)
  • Profile photo of LiamLiam
    Participant
    @lblanden
    Join Date: 2015
    Post Count: 17

    Hey guys i have just finished reading a few of Steve’s Books. In ‘0-130 Properties’ there is a section called the 1% rule. This rule is just a good place to define if a property should be further investigated as a +CF property.

    If i apply it to this property for example
    http://www.realestate.com.au/property-house-sa-salisbury+north-120496577

    $245/w x 52 = $12700
    $12700 / $190000 x 100 = 6.7%
    4.5% intrest plus 1% = 5.5%

    is 1.2% high enough to warrant further investigation. Am I on the right track?

    I hope i have not broken any rules posting this, if i have pls let me know ;-/

    Profile photo of D.T.D.T.
    Participant
    @dtraeger
    Join Date: 2014
    Post Count: 128

    Hiya,

    That’s the correct way to apply the formula, and satisfies Steve’s rule for CF+

    However, the property is a semi which I wouldn’t buy because
    a) Lower quality tenants usually apply for them
    b) You have no control over what happens to the adjoined semi. If it burns down or gets an unsavoury tenant then that’s going to impact on you as well.

    I’ve found Salisbury North to be a decent enough area for CF+ though.

    D.T. | DT Property Management
    http://www.dtproperty.com.au
    Email Me | Phone Me

    Adelaide Property Management - whole Adelaide metro

    Profile photo of Corey BattCorey Batt
    Participant
    @cjaysa
    Join Date: 2012
    Post Count: 1,010

    Numbers are fairly accurate, you would want to be estimating at a higher interest rate considering the current rock bottom rates aren’t indicative of long term averages.

    In reality I wouldn’t be bothered with an ex-HT in Salisbury North, you’re looking at the bottom of the barrel for tenants in the area, whereas for a marginal amount more you can buy a fully detached property at a similar or even higher yield.

    Corey Batt | Precision Funding
    http://www.precisionfunding.com.au
    Email Me | Phone Me

    Investment Focused Finance Strategist - servicing Australia-wide

    Profile photo of LiamLiam
    Participant
    @lblanden
    Join Date: 2015
    Post Count: 17

    Thanks a ton for the advice lads.
    To be honest i have not even got my deposit ready yet but im just trying to implement my learning to real life properties. As i have read, looking on the net is an inefficient way to find IPs but its the only resource available. I didnt know about the problems with semi detached and also was unaware it was an ex housing trust.

    Brilliant mates :D

    Profile photo of JohnnyKJohnnyK
    Participant
    @johnnyk
    Join Date: 2015
    Post Count: 6

    Using Steves rule the following is my 3rd property with this rule 8.4% and each has been getting better returns .. but the trick is in the research finding properties which are straight away returning $$$ .. I don’t see any point in putting my money into subsidising someone else’s rent

    $220/w x 52 = $11440
    $11440 / $135000 x 100 = 8.4%
    4.5% interest plus 1% = 5.5%

    the other two properties return 7.6% and 8.2% all bought this year

    JohnnyK

    If the deal sounds to good to be true ... dont worry it will be ...lol ...

    Profile photo of D.T.D.T.
    Participant
    @dtraeger
    Join Date: 2014
    Post Count: 128

    Using Steves rule the following is my 3rd property with this rule 8.4% and each has been getting better returns .. but the trick is in the research finding properties which are straight away returning $$$ .. I don’t see any point in putting my money into subsidising someone else’s rent
    $220/w x 52 = $11440$11440 / $135000 x 100 = 8.4%4.5% interest plus 1% = 5.5%
    the other two properties return 7.6% and 8.2% all bought this year

    Well done. Where are they located?

    D.T. | DT Property Management
    http://www.dtproperty.com.au
    Email Me | Phone Me

    Adelaide Property Management - whole Adelaide metro

    Profile photo of TGAR80TGAR80
    Participant
    @tgar80
    Join Date: 2015
    Post Count: 1

    I have a property in NZ – Invercargill. Not the best capital gains however certainly PC property.
    I have 1 Block remaining as recently sold the neighbouring block. (releasing equity for a new adventure)
    Selling Block of Flats – (1 block with 3 dwellings. 2 storey, and massive).
    Purchase Price: $250,000 (NZ)
    Rental Income: $485 per week
    Interest Rate: 4.49% (anz) – Principle + Interest
    Term: 30 Years
    Repayments: $292 weekly
    Net: $193 PC per week

    This is a genuine offer. No gotchas’s or catch’s with this one.
    AU to NZ exchange rate is excellent at the moment and there is no capital gains tax or stamp duty.

    Hopefully this plug will attract some people.
    email or text me 0449 135 751

    • This reply was modified 5 years, 1 month ago by Profile photo of TGAR80 TGAR80. Reason: spelling mistake
    Profile photo of JohnnyKJohnnyK
    Participant
    @johnnyk
    Join Date: 2015
    Post Count: 6

    Regional NSW …. :-)

    JohnnyK

    If the deal sounds to good to be true ... dont worry it will be ...lol ...

    Profile photo of leoniey5leoniey5
    Participant
    @leoniey5
    Join Date: 2015
    Post Count: 4

    Wow – I’m learning then because I am only a beginner at this and have 3 properties but I only get 5.5, 5.7 and 5.9 on mine, so I’m guessing that’s not very good. Although I am not so sure about the actual cost of the property in the equation. Just checking I got it right – the equation is with the actual cost of the property isn’t it?

    Profile photo of Corey BattCorey Batt
    Participant
    @cjaysa
    Join Date: 2012
    Post Count: 1,010

    Leoniey it really depends where you’re buying too though. No point going on about how great your yield is if you own in a town of 50 people and declining. :)

    I’ve seen some exceptional properties with 3% yields, and duds at 10%. And more importantly I’ve seen it switched the other way around too!

    Corey Batt | Precision Funding
    http://www.precisionfunding.com.au
    Email Me | Phone Me

    Investment Focused Finance Strategist - servicing Australia-wide

    Profile photo of leoniey5leoniey5
    Participant
    @leoniey5
    Join Date: 2015
    Post Count: 4

    Thanks Cory – At least the properties have all increased in value over the past 3 years (one of them by $40,000), So I am still happy with my investments as long as they continue to grow in value. I would like to buy a couple with a more positive yield though as I am looking towards retirement in the next 3-5 years. Just not sure how to go about it yet.

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