Is there any city can meet 1% rule now?

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Is there any city can meet 1% rule now?

Judy Wang
Member since 2021 · 27 posts · 11 votes

Hi BP community,

I am looking for property investment opportunities that can meet 1% rule. Based on my conversations with several agents in TX, FL and CA, the housing markets there are very crazy. Hardly can find 1% rental houses, and meet 0.5% might be the best. I am wondering, given current low interest rate and very hot housing market, is there any city can meet 1% rule?

Any advices and opinions are welcome! Very glad to join this community and share ideas with you!

Thanks!

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Lane Kawaoka
Rental Property Investor · Honolulu, HAWAII (HI) · Member since 2011 · 4k+ posts · 2k+ votes
5y

Birmingham, Atlanta, Indianapolis, St Louis, Kansas City, Memphis, Little Rock, Indianapolis, Greenville, Jacksonville, Tampa, Houston, San Antonio, Little Rock, Milwaukee, Cincinnati, Dayton, Cleveland, Ohio, or other secondary or tertiary markets.

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  • Alex Olson
    Real Estate Broker · Kansas City Metro · Member since 2015 · 2k+ posts · 1k+ votes
    5y

    I think a good agent, good bank, and good PM make the market. I have helped many clients get to1% or more here in Kansas City with this combination. Hope that helps!

    1Reply
  • Brock Mogensen
    Real Estate Syndicator · Milwaukee, WI · Member since 2018 · 1k+ posts · 907 votes
    5y

    I'd recommend looking at other financial metrics as well like cash on cash, IRR, AAR, equity multiple. The 1% rule is good for a quick and dirty analysis but isn't enough to truly analyze a deal. That being said, I invest in the Milwaukee market where cash flow is high and the 1% rule can be achieved.

    1Reply
  • Judy Wang
    OP
    Member since 2021 · 27 posts · 11 votes
    5y
    Originally posted by @Andria Edwards:

    I feel your pain.  I've also been looking to purchase my first property using the 1% and can't find anything in either market I'm looking in.  And one of those markets is listed in this thread as an area that should have them.  I think a lot of properties that hit this bench mark are being sold off market.  Personally I am thinking about skipping the 1% rule and analyze properties that look good on my own.  IE am I making money after all expenses are paid, are GDP and Population growth for the area looking good, etc.  It's going to require more effort on my end but something has to give lol. and I'm willing to work for it!  Maybe you should find properties that look good to you and do a break down and see where the cash flow is? 

    Hi Andria,

    Totally agree with you! This is the things I am working on right now. I am still struggling with deciding which state and then the city I should focus on. Would love to connect with you and probably we could exchange some ideas. 

    Judy

    0Reply
  • Judy Wang
    OP
    Member since 2021 · 27 posts · 11 votes
    5y
    Originally posted by @Lane Kawaoka:

    Birmingham, Atlanta, Indianapolis, St Louis, Kansas City, Memphis, Little Rock, Indianapolis, Greenville, Jacksonville, Tampa, Houston, San Antonio, Little Rock, Milwaukee, Cincinnati, Dayton, Cleveland, Ohio, or other secondary or tertiary markets.

    Thanks for your advice, Lane. I will take a look at them. 

    0Reply
  • Judy Wang
    OP
    Member since 2021 · 27 posts · 11 votes
    5y
    Originally posted by @Brock Mogensen:

    I'd recommend looking at other financial metrics as well like cash on cash, IRR, AAR, equity multiple. The 1% rule is good for a quick and dirty analysis but isn't enough to truly analyze a deal. That being said, I invest in the Milwaukee market where cash flow is high and the 1% rule can be achieved.

    Thanks for your advice Brock.  Not very familiar with Milwaukee market but open to it. Do you mind shooting me message and share more info? 

    1Reply
  • Julio Silva
    Investor · Lake Elsinore, CA · Member since 2020 · 14 posts · 6 votes
    5y

    @Steve Stackman

    Hello Steve,

    Would love to hear more about the multi-units

    0Reply
  • Justin Polston
    Property Manager · Shelbyville, IN · Member since 2014 · 303 posts · 161 votes
    5y

    @Wang Judy Sure the 1% rule is a start. And yes there are still areas that BEAT it. Indianapolis Suburbs like Shelbyville, Greenfield, Franklin, Greenwood... Any of the donut counties!

    0Reply
  • Bruce Runn
    Investor · Minneapolis, MN · Member since 2014 · 743 posts · 927 votes
    5y

    @Corey Hawkinson

    I think you have/share a good lesson here. If it's already on the MLS, everyone will be looking at it. You have to hustle and take a risk. No one is going to be putting a 1% deal out there for someone to cherry pick w/o risk.


    Because of covid/economy, some of the best buys will be mixed use buildings that have apt's and commercial spaces that are empty if you can figure out how to get the spaces rented out.  I've done this before and they end up being killer deals but you have to add the value and take on the risk to fix up and re rent.  Being successful takes work and it's not a deal unless you can figure out how to solve the problem the last person ran into.

    2Reply
  • George W.
    Investor · NJ · Member since 2018 · 869 posts · 921 votes
    5y

    If the properites you're looking at dont meet the 1% rule maybe you need to increase your down payment. 

    No properties will meet the 1% on the market in my area will meet the 1% rule if you're doing an fha loan with 3.5% downpayment. 

    2Reply
  • Remington LymanBusiness Member
    Real Estate Agent · Columbus, OH · Member since 2017 · 6k+ posts · 7k+ votes
    5y
    Originally posted by @Judy Wang:

    Hi BP community,

    I am looking for property investment opportunities that can meet 1% rule. Based on my conversations with several agents in TX, FL and CA, the housing markets there are very crazy. Hardly can find 1% rental houses, and meet 0.5% might be the best. I am wondering, given current low interest rate and very hot housing market, is there any city can meet 1% rule?

    Any advices and opinions are welcome! Very glad to join this community and share ideas with you!

    Thanks!

    You should check out Columbus, Ohio. Can meet the 1% rule here.

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  • Courtney M.
    Lake Elsinore, CA · Member since 2018 · 235 posts · 300 votes
    5y

    I have purchased 2 properties in Michigan that meet the 1% rule. These are good neighborhoods and I have good tenants.

    Many people buying in states like California and Texas are looking towards appreciation. 

    Everyone has different goals. For most, 1% is used as a qualifier. There are lots of other factors to consider.

    2Reply
  • Judy Wang
    OP
    Member since 2021 · 27 posts · 11 votes
    5y
    Originally posted by @Bruce Runn:

    @Corey Hawkinson

    I think you have/share a good lesson here. If it's already on the MLS, everyone will be looking at it. You have to hustle and take a risk. No one is going to be putting a 1% deal out there for someone to cherry pick w/o risk.


    Because of covid/economy, some of the best buys will be mixed use buildings that have apt's and commercial spaces that are empty if you can figure out how to get the spaces rented out.  I've done this before and they end up being killer deals but you have to add the value and take on the risk to fix up and re rent.  Being successful takes work and it's not a deal unless you can figure out how to solve the problem the last person ran into.

    Bruce, thanks for your advice and sharing experience. I will think about that! 

    0Reply
  • Judy Wang
    OP
    Member since 2021 · 27 posts · 11 votes
    5y
    Originally posted by @Courtney M.:

    I have purchased 2 properties in Michigan that meet the 1% rule. These are good neighborhoods and I have good tenants.

    Many people buying in states like California and Texas are looking towards appreciation. 

    Everyone has different goals. For most, 1% is used as a qualifier. There are lots of other factors to consider.

    Courtney, cannot agree with you any more.  

    0Reply
  • Jake KnightPro Member
    Property Manager · Indianapolis · Member since 2017 · 303 posts · 146 votes
    5y

    In the Indianapolis market it's really competitive right now and can be hard to find 1%. Like some others have mentioned there are other strategies and things about this market that investors like.  Happy to chat further, please DM me if your interested.

    1Reply
  • Jordan FioreBusiness Member
    Real Estate Agent · Cincinnati, OH · Member since 2020 · 204 posts · 152 votes
    5y

    Cincinnati, OH is a great area for investors! The 1% rule still applies here but it all depends on if you are looking at class A, B, or C areas.

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  • Sandra Morrison
    Investor · Cincinnati/Fort Thomas, KY · Member since 2015 · 207 posts · 183 votes
    5y

    @Jordan Fiore I agree there are deals I am finding. One has to be more creative in finding them and keeping the competition from finding them.

    1Reply
  • Cody Harris
    Nampa, ID · Member since 2017 · 67 posts · 24 votes
    5y

    There's a triplex in Boise, ID that just went on the market for $850k. Units rent for $1595, $1550, and $1495. Good deal for around here. Get in touch with me if you'd like more info. 

    0Reply
  • Sean Sloop
    Real Estate Agent · Grand Rapids, MI · Member since 2016 · 251 posts · 224 votes
    5y

    @Wang Judy you can find 1% in the Midwest. Grand Rapids, MI is probably just under 1% as values keep rising.

    Lansing, MI you can definitely get 1%. I invest in both of these markets for reference. I believe Detroit can also get you this price to rent ratio.

    2Reply
  • Drew SygitBusiness Member
    Property Manager · Royal Oak, MI · Member since 2012 · 13k+ posts · 9k+ votes
    5y

    You can easily hit 1%+ in the Ring Cities of Metro Detroit, which will be Class B and C properties.

    In the City of Detroit you can find 2%+ deals, but you MUST understand you'll be investing in Class C properties and you should avoid the Class D ones.

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  • Heeyeon Chung
    Member since 2021 · 42 posts · 21 votes
    5y
    Originally posted by @Cody Harris:

    There's a triplex in Boise, ID that just went on the market for $850k. Units rent for $1595, $1550, and $1495. Good deal for around here. Get in touch with me if you'd like more info. 

    Can I get some more info on this? I am interested in Boise, ID.  

    0Reply
  • Dan Rowley
    Investor · Cary, NC · Member since 2012 · 218 posts · 196 votes
    5y

    What I've not seen mention of in this thread is the reality of our historically low financing rates and it's impact on the 1% rule.  This 1% rule has been around a long time and so over most of it's history interest rates were much higher.  Obviously, current prices have adjusted upwards party as a consequence of this cheap financing. 

    So what I'm saying is if you were to compare cash flows on the very same property back in a more 'normal' interest rate environment of 5-6% interest rates at the 1% rent/value VS. at today's 3-4% interest rates  at a .75-.80% rent/value ratio = you'll find that the cash flow yield is essentially THE SAME. 

    Of course, if you are buying cash this does not apply but if you can qualify for financing today why on earth would you not finance your purchase at the current rates?

    3Reply
  • Judy Wang
    OP
    Member since 2021 · 27 posts · 11 votes
    5y
    Originally posted by @Dan Rowley:

    What I've not seen mention of in this thread is the reality of our historically low financing rates and it's impact on the 1% rule.  This 1% rule has been around a long time and so over most of it's history interest rates were much higher.  Obviously, current prices have adjusted upwards party as a consequence of this cheap financing. 

    So what I'm saying is if you were to compare cash flows on the very same property back in a more 'normal' interest rate environment of 5-6% interest rates at the 1% rent/value VS. at today's 3-4% interest rates  at a .75-.80% rent/value ratio = you'll find that the cash flow yield is essentially THE SAME. 

    Of course, if you are buying cash this does not apply but if you can qualify for financing today why on earth would you not finance your purchase at the current rates?

     Hi Dan, you're right. We have to consider current extremely low interest rate. Thanks for sharing this! 

    0Reply
  • Carlos Ptriawan
    Member since 2019 · 7k+ posts · 4k+ votes
    5y

    There're 18 cities you can meet 1.0 rent rule by default as of 2/11/2021.

    0Reply
  • Dustin TurnerBusiness Member
    Real Estate Broker · Little Rock and Hot Springs Arkansas · Member since 2020 · 56 posts · 62 votes
    5y

    Little Rock, AR - you can find 1% rentals. 

    1Reply
  • Matthew Rolf
    Insurance Agent · TX · Member since 2018 · 362 posts · 175 votes
    5y

    @Judy Wang they exist in Houston, especially on the East side.  Most neighborhoods with better cashflow will have worse appreciation potential (that is very generic I know)

    0Reply
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