As I am moving into Stamford, Greenwich, Yonkers, White Plains and New Rochelle, I am finding it hard to hit that 1% rule that I've always tried to follow. I'm getting close, but I'm around 0.85%. I checked in Manhattan and Brooklyn, and there is no 1% possible. How do you all handle this 1% rule in major metro markets in the Northeast and New York?
If you don’t mind me asking, what is the 1% rule?
@Mark Younger The 1% rule is a general guideline that monthly rents should make up 1% of the purchase price. This is mostly used to see if the numbers are in the ballpark before you do a deep dive on the financial details.
$500,000 property should have roughly $5,000 in monthly rents.
@Mike A. Agreed, Properties that make financial sense are hard to find, you will most frequently need to find a multi-family property to get closer to that 1% number. There are usually more frequent in more downtrodden areas like Mt. Vernon, Yonkers and Port Chester.
Aw man thanks !! I did not kno that it makes a lot of sense. I’m a college student that is still Learning about real estate.
So what do you do if the rents are close to 1%, around .80% - .90% in these types of markets?
NorthEast markets are tough, plain and simple. If rental income is your strategy, I would caution against it. Rent-value ratios are very high here. On top of that, the legal environment is not friendly to landlords.
The saving grace could be that the market retains massive strength and property values keep going up. That game can only go on for so long. I am in the confirmed-bear category, so I wouldn't bet on it.
Don't get me wrong. I love living in NYC. I take my above-average, NYC salary and put it straight to work in other markets.
@Trevor Ewen what markets are you focusing on? I’m also looking to start investing out of state. The appreciation here is great but like you said I think that cycle is coming to an end.