Real Estate Syndicator · Portland, OR · Member since 2014 · 453 posts · 312 votes
6y
@Weijia Yu
The 1% rule is only a back of the napkin quick calculation to see if the property will make money. I would start to develop a pro forma deal sheet and start evaluating deals.
We are buying in portland and surrounding areas, they do not all meet the 1% rule as they are sold, but with a value add component to them they can get there. Same thing with the CAP rate.
First of this year we bought a 4 plex for 385k rents at 600/unit. This would be .6 of the 1% rule. We put 70k into it, some cash for keys and raising rents to 1100/ unit. When you look at that calculation 4400/455k, it’s pretty close....
Deals are out there in this area, you just have to look harder and be willing to put in some work. If you think that you’ll just have something drop in your lap it’s not gonna happen. Search for wholesalers in the area and get on their list. Drive by houses and send hand written notes. Knock on doors and talk to people.
Realtor · Bellevue, WA · Member since 2019 · 882 posts · 1k+ votes
6y
@Weijia Yu, there are some properties that meet that criteria, but they are rate. House hacking for a single family house may be one of the way to achieve thar rule. Keep in mind that the Greter Seattle market lean more towards appreciation more than cash flow compared to other market. That said, good deals are still out there, but just hard to find. Let me know if you have questions and we can chat more.
The 1% is only a guide. It’s better to use actual numbers. If the property cash flows that is what matters. My daughter lives in Vancouver near Portland, she has the same issue.
Real Estate Syndicator · Portland, OR · Member since 2014 · 453 posts · 312 votes
6y
@Weijia Yu
The 1% rule is only a back of the napkin quick calculation to see if the property will make money. I would start to develop a pro forma deal sheet and start evaluating deals.
We are buying in portland and surrounding areas, they do not all meet the 1% rule as they are sold, but with a value add component to them they can get there. Same thing with the CAP rate.
First of this year we bought a 4 plex for 385k rents at 600/unit. This would be .6 of the 1% rule. We put 70k into it, some cash for keys and raising rents to 1100/ unit. When you look at that calculation 4400/455k, it’s pretty close....
Deals are out there in this area, you just have to look harder and be willing to put in some work. If you think that you’ll just have something drop in your lap it’s not gonna happen. Search for wholesalers in the area and get on their list. Drive by houses and send hand written notes. Knock on doors and talk to people.
I agree with what everyone else is saying about the 1% rule just being a guide. This came up in one of the recent BiggerPockets podcasts and David Greene said that the 1% rule becomes more flexible in more expensive markets. Run the numbers and if there is cashflow, you are in good shape to keep pushing forward!
@Weijia Yu, there are some properties that meet that criteria, but they are rate. House hacking for a single family house may be one of the way to achieve thar rule. Keep in mind that the Greter Seattle market lean more towards appreciation more than cash flow compared to other market. That said, good deals are still out there, but just hard to find. Let me know if you have questions and we can chat more.
Thanks for replying. I don't mind looking at other areas within 3-4 hours drive. However, even I look at Spokane and Yakima, at a glance, they are all like 250k price with 1.5k rent. So I guess I will first try contacting wholesalers to see there is usually 1% rule deal existing in the Washington state.
Real Estate Agent · Sisters, OR · Member since 2014 · 1k+ posts · 1k+ votes
6y
I saw some bigger multifamily in Washington hit that 1% rule even a little higher. As interest rates drop the 1% rule gets harder and harder. I would say Mr. @AJ Shepard hit a home run that is a damn good find. You can do it and you should do it but its as difficult to find those as its ever been.
I would also say look at things and be realistic about what you can do. When you have confidence on what you can do, do it! 9 times out of 10 you sill be happy you did down the road.
Real Estate Agent · Bellingham, WA · Member since 2017 · 427 posts · 182 votes
6y
@Weijia Yu you’ve already gotten some great advice. Deals are possible, but if you stick only to the 1% or 2% rule you will never find anything in state right now.
I love AJ’s example, and it was a great purchase for him.
Foreclosures could be an option, but there aren’t aor of foreclosures hitting the auctions right now, and those that are are getting gobbled up by experienced auction investors. Just saw one that had an opening bid of 130k get sold for 245k, with an arv of 299 and needing 30k of work. It also had 8k of back taxes due! Obviously, that’s something only a few investors could make work. If you feel you are one of them, I encourage you to go for it. If not, let’s talk sometime and we can analyze deals in WA state together to see what works and doesn’t work for you.
I agree with everyone else. The 1% rule here is very very difficult. Not impossible, but difficult. You will have to sort through a lot of properties before you find something that meets the 1% rule. It also really depends on the market you are searching in. Go to Aberdeen, Raymond, or some other small market and you will have better luck. The problem you will run into in these locations is lack of job growth, population growth and higher likelihood of poor tenant quality. If you are looking to invest in King, Pierce, Thurston, Snohomish, or evening Lewis county you will struggle to find a home that fits the 1% rule. If you do, it’s like finding gold. People are doing it though. In Washington Rents are high but home prices are just sky high so they don’t match up well. Don’t give up though. Keep at it.