The 1 in 100 rule?

The 1 in a 100 rule.

There is a general rule in property that for every 100 you look at you will actually end up investing in just one. Now initially this can seem discouraging, but this ratio decreases as time goes by and your expertise in properties increases.

Just for clarfication when I mention looking at a property, it doesn't actually mean arranging a viewing and seeing in the flesh. Rather it may have just caught your eye in the local newspaper listings and warranted a more thorough reading. Of course it might not meet your standards or criteria, but it is the first property you have looked at.

This 1 in a 100 rule can be further broken down, into that you will probably make offers for 10% of them. These will meet your standards of the location, the yield possible and most importantly the forwarded buying price. Now if all these are being converted into actual purchases one of two things is occuring;
1) You have become an excellent negoiter and have the knowledge and experience to transform yourself into a fantastic buyer or ...

2) You are offering far too much money for the properties.

Ideally when calculating the finances you would like to be aiming for an annual yield of 10%. So make sure you not only look at your own portfolio of investments (if you have any), but rental properties in the surrounding area. This is especially important for landlords with an existing portfolio as they will have thier own comparisons already in their mind from thier other properties but this leaves them slightly short changed when rental rates increase.

Now following your 10 offers, the most likely scenario is that 1 will be converted into a purchase. This is not something to be displeased about as not only are you facing competition from other buyers who could gazump you (people are willing to spend more on a house they themselves will live in), but other circumstances like the seller changing his mind, or numerous people bidding and driving the price back up to market value price

__________________
Parmdeep Vadesha
Managing Director
Vadesha Properties Ltd

“the species that survived were not the most intelligent –they were the most adaptable to change” Charles Darwin

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