I know that in certain markets expecting a 2% monthly rental/purchase price is unrealistic. I've been evaluating properties in North Jersey in towns like Wayne, Parsippany, Rutherford, Nutley, Summit, Cranford, Westfield, Montclair, Vernoa, and Weehawken. I don't see anything approaching 2%, what percentage do other investors in this area typically consider to be an acceptable monthly income/purchase ratio?
Just to add a little bit more background, this would be a house hack. I am however evaluating properties both as house hacks and as a rentals only so I know how they will perform if I move into another property as a primary residence after a year has passed. I would probably be looking to finance with an FHA loan.
You would be lucky to find something that even met the 1% rule in those areas. Those are all high end areas for the most part. I would look for something that just had positive cash flow. Or look for something you can really add value to (ex ability to add a bedroom, add square footage or rehab).
I threw this rule out the window when looking for my house hack. My "rule" when I was looking was 0.7%. I found a 4-unit, lived in one of the units a year, moved out, raised rents, and it's close to making the 0.1% rule now (based on original purchase price).
Updated 8 months ago
I meant 1%, not 0.1%.
HIgh end areas for sure!. As long as you can cashflow after all expenses and expenditures set aside. You may want to look into areas that are close to those areas that are more on the B- C+ areas like Rahway, Roselle, Linden, Lyndhurst, etc.
Free eBook from BiggerPockets!
Join BiggerPockets and get The Ultimate Beginner's Guide to Real Estate Investing for FREE - read by more than 100,000 people - AND get exclusive real estate investing tips, tricks and techniques delivered straight to your inbox twice weekly!
- Actionable advice for getting started,
- Discover the 10 Most Lucrative Real Estate Niches,
- Learn how to get started with or without money,
- Explore Real-Life Strategies for Building Wealth,
- And a LOT more.
Sign up below to download the eBook for FREE today!
We hate spam just as much as you
Join the Largest Real Estate Investing Community
Basic membership is free, forever.