Does the 1% Rule still apply in California?

Question

I am learning a lot of info and one of the things I stumbled across is the 1% or 10% rule for holding real estate is this still applicable in California? If not what are the metrics you care the most about for investment properties or multi family?

Carlos Ptriawan · Answer

1% rule In CA works last time in 1994.1% rule is still working in 2022 in certain zip codes in Indiana, Ohio, and Alabama, but even there the median is 0.8 by now with sub 3% rate/25%down.

Bruce Woodruff · Answer

I wouldn't pay attention to any 'rules' that someone else made up. Do your own math and see if the deal works for you.

Having said that, good luck getting that in sunny CA......

Charles Renn · Answer

Hey @Michael Figueroa, you have a lot of great advice here already. If I can add anything it would be to ask yourself why am I looking to invest in CA? Once you have your goals set as well as expectations, you can start refining your process and parameters on finding properties. Hope this makes sense. Do you already own the home you live in?

Nathan Gesner · Answer

The 1% rule is simply a filtering tool. You look for properties that appear to meet the 1% rule. If they don't, you discard them and move on to the next. IF they do, then you investigate further. This way you're not doing a deep dive on 100 properties. You apply the 1% rule to filter out the "losers" and just focus on the few that look like potential deals.

However, every market is different. In some markets, you'll never find a property that meets the 1% rule so your "rule" needs to be adjusted. In my market, anything above 0.7% would be considered a good investment. It may not cash flow, but it will pay for itself and have good appreciation. In cheaper markets like Cleveland you can find properties that meet the 1% rule all the time, they will cash flow, but they won't get much appreciation (except for rare markets like 2020/2021).

Robert Reynolds · Answer

Maybe for short term rental, but definitely not for traditional long term rentals and multi-family. I'd target homes that need a little fixing up, and do live in flips/house hacking since you are a contractor.

Caroline Widjaja · Answer

1% rule or 10% rule is NOT applicable in CA. That's the truth. CA market is good for appreciation only. If you're looking for a 1 or 10% rule, you have a better chance investing out of CA.

Does the 1% Rule still apply in California?

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