Is the 1% rule dead?
Most Popular Reply
Scott TrenchPro Member
Rental Property Investor · Denver, CO · Member since 2014 · 2k+ posts · 6k+ votesThe 1% rule is essentially not going to happen in most markets, unless you are in the midwest or more rural/LCOL areas.
I tend to think about it a little differently. I look for locations that I am comfortable with, and look for the best rental yield I can get in that location. This is how I begin my search. However, the highest yielding property is often not the property that I actually want to buy. It just helps me sort out all the stuff that definitely won't work.
92 Replies
- 2yJohn MorganPro MemberRental Property Investor · Grand Prairie, TX · Member since 2018 · 2k+ posts · 2k+ votes
You can still get the 1% rule in some areas but appreciation is weak most likely. I’ve bought 10 houses in a ghetto city in Arkansas that gets the 2% rule. I’m not expecting any appreciation but the cash flow is good. I’ve got 19 houses in a better appreciating area (Dallas), but I’m only hitting the .7% rule here. Appreciation is good in TX but I’m breaking even the first couple years when I buy here. Fortunately market rent is coming way up each year so that helps.
- Rental Property Investor · Member since 2023 · 13 posts · 5 votes2y
Quote from @James Hamling:
Quote from @Bob S.:
Quote from @James Hamling:
Quote from @Bob S.:
Quote from @Mohammad Parwez:
You can still find a few properties in my Triad NC area where a few properties get closer to the 1% rule.
However, most of the properties are now in the 0.6-0.8% range.
For example, you can get a 3 bed/2 bath SFH in a decent neighborhood for about 270-300k that can generate a rent of about 2000-2300/m.
Thanks
Mohammad Parwez
336-999-9086
https://mohammadrealtor.com
People really invest 300k to make less then 6% net? WOW, I really am spoiled.
I have some who invest for negative cash-flow. They don't care about the cash-flow, The write-off's are profitable and there looking at the out-sized equitable gains.
Different persons, different situations, different benefits.
Wow, interesting, thanks
Example. One is a tech engineer, running a team. Clears in 400's. Tax's hit him hard, real hard. First fed, than state. So for him, paper losses are good. At worst, it's deciding who get's that $ that he won't see regardless, at best it can notch him down a tax bracket.
So sticks to path of progress, real top shelf A quality properties. With plan to liquidate around yr 5-7, 1031 those gains to pyramid the equity growth.
Acquires a new one via capital injection annually, and with the pyramiding, after 20yrs of this will be siting on a nice holdings that is planned to fund kids university tuitions via rents at that time, which around yr17 we will start deploying into assets with more of that cash-flow focus.
Playing the long game, it's not for those chasing rainbows, definently for the LT planned methodical focus.
Also, add in depreciation benefits also, those add up fast.
And to any wondering, no, I don't loose a wink of sleep over using legal tax strategies. yes, I think those who can utilize it have earned it and don't owe a thing to anyone else. When politicians stop becoming multi-millionaires via civil service jobs than I will start to give a dang. Or, how about they get paid the median income for the areas they represent.
I like this strategy. More opportunity boosts this approach is to do accelerated depreciation through cost segregation and meet the requirements to claim real estate professional tax benefits.
Quote from @John Morgan:
You can still get the 1% rule in some areas but appreciation is weak most likely. I’ve bought 10 houses in a ghetto city in Arkansas that gets the 2% rule. I’m not expecting any appreciation but the cash flow is good. I’ve got 19 houses in a better appreciating area (Dallas), but I’m only hitting the .7% rule here. Appreciation is good in TX but I’m breaking even the first couple years when I buy here. Fortunately market rent is coming way up each year so that helps.
Interesting, I have been getting 2% rule and, MUCH higher, 5 6 7 years ago. This is on top of the triple quadruple or more in appreciation over the last 10 years
Thanks for the reply.
@Scott Trench what platform is that in the screenshot where you track rent yield?
I'm definitely looking to get into bigger deal sizes if the Cash on Cash and rent yield makes sense. The last two deals I did were in the $350-450k range which is more worth it in my opinion.
Like others mentioned sub $150-180k doesn't seem worth it, especially in blue states.
- 2yScott TrenchPro MemberRental Property Investor · Denver, CO · Member since 2014 · 2k+ posts · 6k+ votes
@Saad D. - This is BiggerPockets "Deal Finder" - you can use this as a pro member by checking out the link at the top of the screen.
Thanks for being a pro member, and now we have to figure out why you weren't aware of this awesome new tool!
- Real Estate Agent · Houston · Member since 2022 · 34 posts · 19 votes2y
The question is asking if the "1% rule" (where rental income should be 1% of the purchase price) is still a relevant guideline for real estate investing. The respondent's perspective is that while the 1% rule can be a starting point, it's not the only factor to consider. They are willing to consider properties that are close to meeting the 1% rule, but will conduct further analysis to make a final decision.
- New to Real Estate · Member since 2024 · 43 posts · 22 votes2y
So the 1% rule is just a way to filter down the many deals you might look at. It’s not a metric for knowing if the deal is going to fit your goals. Your performance goals are base on a bunch of factors.
Seems like the “buy box” is the real filter for most everyone. You figure out what kind of deals meet your investing goals and then you filter the opportunities within that framework.
How are you all taking that first pool of opportunities and whittling it down to a manageable list to investigate further? Is it the buy box? Is it a particular cash flow goal? Is it an appreciation goal? Do you have simplified ratios or percentages you’re using to make quick decisions?
- Real Estate Broker · Los Angeles, CA · Member since 2018 · 307 posts · 146 votes2y
Just glancing over some of the responses this may be understood. The 1% rule states that your monthly rent should be 1% of the per unit price. It is a guideline more than a rule. If the numbers are close than you are in the ball park. It simply is a metric to measure that your odds of getting a return are better. It is still subject the mortgage rates and business plan to make the investment profitable.
Quote from @Dennis Maynard:
Just glancing over some of the responses this may be understood. The 1% rule states that your monthly rent should be 1% of the per unit price. It is a guideline more than a rule. If the numbers are close than you are in the ball park. It simply is a metric to measure that your odds of getting a return are better. It is still subject the mortgage rates and business plan to make the investment profitable.
Correct, however 1% is NOT going to provide you with a good return. I will not buy anything unless I get 15- 20% NET per year based on cash purchase. All in for example, 75k, rent 1600, thats 2% + That gets me going :)
- Architect · FL · Member since 2020 · 15 posts · 3 votes2y
Quote from @Saad D.:
Hi All,
I was wondering are you still using the 1% rule when doing quick and dirty new deal analysis? Is anyone out there still able to achieve the 1% rule and in which markets?
Recently I noticed I get to 0.7 or 0.8% at best (i.e. 100k purchase price, $700-800 rent per month).
Excited to learn from you all!The 1% rule is still a useful benchmark for quickly evaluating deals, but in today's market, it's becoming harder to achieve, especially in competitive or appreciating areas. That said, you should adapt your strategy based on the market conditions.
In lower-cost markets or areas with less competition, you might still be able to hit 1%. However, with rising property prices and rents not keeping pace, it’s becoming more common to see 0.7% to 0.8%. In those situations, focus on value-add opportunities—like rehab, repositioning, or optimizing expenses—that can increase the return on your investment.
Keep in mind, the 1% rule is just a quick filter. Always dig deeper into the numbers (cash flow, CapEx, etc.) before making any decisions.
Quote from @Hassan Asif:
Quote from @Saad D.:
Hi All,
I was wondering are you still using the 1% rule when doing quick and dirty new deal analysis? Is anyone out there still able to achieve the 1% rule and in which markets?
Recently I noticed I get to 0.7 or 0.8% at best (i.e. 100k purchase price, $700-800 rent per month).
Excited to learn from you all!The 1% rule is still a useful benchmark for quickly evaluating deals, but in today's market, it's becoming harder to achieve, especially in competitive or appreciating areas. That said, you should adapt your strategy based on the market conditions.
In lower-cost markets or areas with less competition, you might still be able to hit 1%. However, with rising property prices and rents not keeping pace, it’s becoming more common to see 0.7% to 0.8%. In those situations, focus on value-add opportunities—like rehab, repositioning, or optimizing expenses—that can increase the return on your investment.
Keep in mind, the 1% rule is just a quick filter. Always dig deeper into the numbers (cash flow, CapEx, etc.) before making any decisions.
2% is my norm :)
- Member since 2024 · 1 post · 0 votes2y
Quote from @Account Closed:
No longer a rule, just a ghost in the past, A relic of days when profits were vast.
Now we chase dreams in a world redefined, Where rules once golden are left far behind.
Awesome quote haha
- TX · Member since 2014 · 151 posts · 23 votes2y15-20% net, so this is after any forecasted vacancy, repairs, property taxes etc. Gonna be tough but doable. Funny that some people do deals for much less.. for what they can get with a hysa.
Quote from @Bob S.:
Quote from @Dennis Maynard:
Just glancing over some of the responses this may be understood. The 1% rule states that your monthly rent should be 1% of the per unit price. It is a guideline more than a rule. If the numbers are close than you are in the ball park. It simply is a metric to measure that your odds of getting a return are better. It is still subject the mortgage rates and business plan to make the investment profitable.
Correct, however 1% is NOT going to provide you with a good return. I will not buy anything unless I get 15- 20% NET per year based on cash purchase. All in for example, 75k, rent 1600, thats 2% + That gets me going :)
- TX · Member since 2014 · 151 posts · 23 votes2y
Quote from @Bob S.:
Quote from @Hassan Asif:
Quote from @Saad D.:
Hi All,
I was wondering are you still using the 1% rule when doing quick and dirty new deal analysis? Is anyone out there still able to achieve the 1% rule and in which markets?
Recently I noticed I get to 0.7 or 0.8% at best (i.e. 100k purchase price, $700-800 rent per month).
Excited to learn from you all!The 1% rule is still a useful benchmark for quickly evaluating deals, but in today's market, it's becoming harder to achieve, especially in competitive or appreciating areas. That said, you should adapt your strategy based on the market conditions.
In lower-cost markets or areas with less competition, you might still be able to hit 1%. However, with rising property prices and rents not keeping pace, it’s becoming more common to see 0.7% to 0.8%. In those situations, focus on value-add opportunities—like rehab, repositioning, or optimizing expenses—that can increase the return on your investment.
Keep in mind, the 1% rule is just a quick filter. Always dig deeper into the numbers (cash flow, CapEx, etc.) before making any decisions.
2% is my norm :)
Are these section 8? Pretty tough to get a B home in a nice neighborhood to meet the 2% rule. Most likely going to be a C / section 8?
- I typically do about 90% section 8 or other government programs. They pay more and more stable. However I just got a tenant to pay 1700 I'm all into it for 75,000
Quote from @Sean Gallagher:
Quote from @Bob S.:
Quote from @Hassan Asif:
Quote from @Saad D.:
Hi All,
I was wondering are you still using the 1% rule when doing quick and dirty new deal analysis? Is anyone out there still able to achieve the 1% rule and in which markets?
Recently I noticed I get to 0.7 or 0.8% at best (i.e. 100k purchase price, $700-800 rent per month).
Excited to learn from you all!The 1% rule is still a useful benchmark for quickly evaluating deals, but in today's market, it's becoming harder to achieve, especially in competitive or appreciating areas. That said, you should adapt your strategy based on the market conditions.
In lower-cost markets or areas with less competition, you might still be able to hit 1%. However, with rising property prices and rents not keeping pace, it’s becoming more common to see 0.7% to 0.8%. In those situations, focus on value-add opportunities—like rehab, repositioning, or optimizing expenses—that can increase the return on your investment.
Keep in mind, the 1% rule is just a quick filter. Always dig deeper into the numbers (cash flow, CapEx, etc.) before making any decisions.
2% is my norm :)
Are these section 8? Pretty tough to get a B home in a nice neighborhood to meet the 2% rule. Most likely going to be a C / section 8?
- All of my personals are never less than 15 to 20% net based on cash purchases after all expenses
Quote from @Sean Gallagher:
15-20% net, so this is after any forecasted vacancy, repairs, property taxes etc. Gonna be tough but doable. Funny that some people do deals for much less.. for what they can get with a hysa.Quote from @Bob S.:
Quote from @Dennis Maynard:
Just glancing over some of the responses this may be understood. The 1% rule states that your monthly rent should be 1% of the per unit price. It is a guideline more than a rule. If the numbers are close than you are in the ball park. It simply is a metric to measure that your odds of getting a return are better. It is still subject the mortgage rates and business plan to make the investment profitable.
Correct, however 1% is NOT going to provide you with a good return. I will not buy anything unless I get 15- 20% NET per year based on cash purchase. All in for example, 75k, rent 1600, thats 2% + That gets me going :)
Quote from @Sean Gallagher:
Quote from @Bob S.:
Quote from @Hassan Asif:
Quote from @Saad D.:
Hi All,
I was wondering are you still using the 1% rule when doing quick and dirty new deal analysis? Is anyone out there still able to achieve the 1% rule and in which markets?
Recently I noticed I get to 0.7 or 0.8% at best (i.e. 100k purchase price, $700-800 rent per month).
Excited to learn from you all!The 1% rule is still a useful benchmark for quickly evaluating deals, but in today's market, it's becoming harder to achieve, especially in competitive or appreciating areas. That said, you should adapt your strategy based on the market conditions.
In lower-cost markets or areas with less competition, you might still be able to hit 1%. However, with rising property prices and rents not keeping pace, it’s becoming more common to see 0.7% to 0.8%. In those situations, focus on value-add opportunities—like rehab, repositioning, or optimizing expenses—that can increase the return on your investment.
Keep in mind, the 1% rule is just a quick filter. Always dig deeper into the numbers (cash flow, CapEx, etc.) before making any decisions.
2% is my norm :)
Are these section 8? Pretty tough to get a B home in a nice neighborhood to meet the 2% rule. Most likely going to be a C / section 8?
I never bought into the BS ABCD area thing . Makes zero sense . A areas is where you n I would live , can't make money there . So eveything starts with a B . The are not terrible war zone areas . All in full Reno 76kish, value 125-135k 1700 rent . Great deal .
- TX · Member since 2014 · 151 posts · 23 votes2y
Quote from @Bob S.:
Quote from @Sean Gallagher:
Quote from @Bob S.:
Quote from @Hassan Asif:
Quote from @Saad D.:
Hi All,
I was wondering are you still using the 1% rule when doing quick and dirty new deal analysis? Is anyone out there still able to achieve the 1% rule and in which markets?
Recently I noticed I get to 0.7 or 0.8% at best (i.e. 100k purchase price, $700-800 rent per month).
Excited to learn from you all!The 1% rule is still a useful benchmark for quickly evaluating deals, but in today's market, it's becoming harder to achieve, especially in competitive or appreciating areas. That said, you should adapt your strategy based on the market conditions.
In lower-cost markets or areas with less competition, you might still be able to hit 1%. However, with rising property prices and rents not keeping pace, it’s becoming more common to see 0.7% to 0.8%. In those situations, focus on value-add opportunities—like rehab, repositioning, or optimizing expenses—that can increase the return on your investment.
Keep in mind, the 1% rule is just a quick filter. Always dig deeper into the numbers (cash flow, CapEx, etc.) before making any decisions.
2% is my norm :)
Are these section 8? Pretty tough to get a B home in a nice neighborhood to meet the 2% rule. Most likely going to be a C / section 8?
I never bought into the BS ABCD area thing . Makes zero sense . A areas is where you n I would live , can't make money there . So eveything starts with a B . The are not terrible war zone areas . All in full Reno 76kish, value 125-135k 1700 rent . Great deal .
Understood, I'm starting to learn the markets better. Appreciate you sharing this info.
- 2yGregory SchwartzBusiness MemberRental Property Investor · College Station, TX · Member since 2016 · 1k+ posts · 1k+ votes
"The Rent-to-Purchase Price Ratio" will never be dead as a quick way to evaluate properties. However, the percentage varies based on factors like location, property age, condition, and expenses such as taxes, insurance, and interest rates. Instead of fixating on a strict 1%, 2%, or 0.7% rule, think of it as a flexible guideline that needs to adapt to the market and specific property characteristics. And always run more in-depth analysts before purchasing a property.
Good luck
Schwartz Realty Group5118 Reviews - Atlanta, GA · Member since 2024 · 9 posts · 1 vote2y
Like some of the others on this chain, I think it is a decent place to start, but I think the analysis needs to be more detailed and nuanced. I utilize FMLS, so I will look up similar properties to our subject and see the rent they've closed for. This is a more accurate way to gauge what you can expect in rent than just the 1% rule.
Quote from @John Morgan:
You can still get the 1% rule in some areas but appreciation is weak most likely. I’ve bought 10 houses in a ghetto city in Arkansas that gets the 2% rule. I’m not expecting any appreciation but the cash flow is good. I’ve got 19 houses in a better appreciating area (Dallas), but I’m only hitting the .7% rule here. Appreciation is good in TX but I’m breaking even the first couple years when I buy here. Fortunately market rent is coming way up each year so that helps.
One of my clients closes yesterday, all in 120k, RENT 1800, 1% rule is very easy. Mine are 2% +
- 2yNicholas L.Pro MemberFlipper/Rehabber · Pittsburgh · Member since 2018 · 6k+ posts · 5k+ votes
off market, yes?
- 2yJohn MorganPro MemberRental Property Investor · Grand Prairie, TX · Member since 2018 · 2k+ posts · 2k+ votesYes the 1 or 2% rule area exist out there today. But appreciation is generally very weak in areas you can get better than the 1% rule. The 10 SFR I bought in Arkansas that get the 2% rule won’t appreciate much over 10-15 years. Maybe 1%/year if I’m lucky. The 18 SFR I have in the Dallas area will most likely appreciate 3-6%/year. I’m lucky to get between the .8% or 1% rule in Dallas now and make only $200-$400/month when I first buy. So it’s cash flow vs the appreciation play. I like them both. But over 10-20 years, I prefer appreciation. You’re going to have to replace all the big cap ex things in that time frame. So the cheap homes in lower class areas that get the 2% rule will have the same cap ex issues and costs as the homes in higher appreciation areas that will need the same cap ex. But leveraged appreciation on better appreciating homes and areas will win out every time. But it’s nice to have the cash flow from the cheap ones!
Quote from @Bob S.:
Quote from @John Morgan:
You can still get the 1% rule in some areas but appreciation is weak most likely. I’ve bought 10 houses in a ghetto city in Arkansas that gets the 2% rule. I’m not expecting any appreciation but the cash flow is good. I’ve got 19 houses in a better appreciating area (Dallas), but I’m only hitting the .7% rule here. Appreciation is good in TX but I’m breaking even the first couple years when I buy here. Fortunately market rent is coming way up each year so that helps.
One of my clients closes yesterday, all in 120k, RENT 1800, 1% rule is very easy. Mine are 2% +
- 2yNicholas L.Pro MemberFlipper/Rehabber · Pittsburgh · Member since 2018 · 6k+ posts · 5k+ votes
for sure, just wanted to confirm. new investors are shopping on Zillow
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