Looking for the 1%+ rule in cities outside of where I live

36 Replies

Hi guys, looking to start investing outside of my current city which is seeing about a 1/2% rule on the sales price. So a $400k house rents for $2,000 on average. Looking for other cities with decent size populations that are still seeing a 1-2% of the sales price in monthly rents. I know that is really broad but where are some areas that you guys are investing in out of state? Thanks!

Updated 26 days ago

Thanks for all the replies! Anyone from Dallas or other major cities in Texas seeing these types of returns? Also, if your a realtor from Texas and you have a few listings, love to talk!

There are several micro markets surrounding Kansas City that have 3 bedrooms, 1-2 bathrooms and 1-2 car garages on the MLS for $100-150k that have tenants in them paying $1000-1500 a month rents. They move quickly but what do you expect with great investments?

Originally posted by @JIll Rieser :

good question @Joe Liu I am in the same boat - wondering if anyone has experience in Boise?

 Hi Jill I am in Boise.  Boise itself is hard to get to the 1% rule, but you can find it in some of the outlying areas.  I bought one just last December in Nampa (about 25 miles from Boise city center.  30 min drive)

Originally posted by @Joe Liu :

Hi guys, looking to start investing outside of my current city which is seeing about a 1/2% rule on the sales price. So a $400k house rents for $2,000 on average. Looking for other cities with decent size populations that are still seeing a 1-2% of the sales price in monthly rents. I know that is really broad but where are some areas that you guys are investing in out of state? Thanks!

 You can find some in some of the outlying areas of Boise, ID.  Feel free to give me a shout for further discussion.

Originally posted by @CJ M. :

@Joe Liu

Gosh, just throw a rock anywhere in the midwest and you'll probably hit a property that would meet the 1%/2% rule.

You'll also hit a property that has a low cost to rent ratio for a reason.

 

I live in SW Missouri,  Appreciation is harder to come by but I own property in Missouri and KS.    i only consider 1.5% or better.   low cost of entry and the brrrr is alive and well..    flipping margins are lower here too but i have turned a few.   I know some good agents and property managers in the area if interested..

Originally posted by @CJ M. :

@David Abbate

Thanks. Not really sure what your point is though.

My point is, mainly for the OP to consider, that many of these areas you can "throw a rock" at still haven't recovered from their peak real dollar value back in 2005- despite the tailwind of a massive bull market in the last 8 years. The best Canton zip code I can see is 44718, which is only down about 7.6% where as 44710 is down 42%, since 2005, in real dollars. 

A person putting their money in a mattress would have 42% more buying power with it today than someone who bought a median house in 44710 in 2005.

I understand they've been collecting rent, but the OP needs to see the whole picture, including the appreciation loss, which is why many of these areas are priced the way they are regarding the 1% rule, which is what he was asking about. 

 

@David Abbate

When I said "throw a rock" it was a light-hearted comment. Relax buddy. But hey, you're the expert in my area so I'm not going to argue. Guess I'll take my $40-50K properties that rent for $1,000 and call it a loss.

You nailed it. Looking for an area with 1%~ but still a lot of room to grow in appreciation. We have well exceeded 2005 market numbers in my area but I don't need the highest 3-5% return. I am looking for an area that others are also migrating to like most parts of Texas. Do you have any other links to reports that show population and job increases?

Thanks!

Originally posted by @David Abbate :
Originally posted by @CJ M.:

@David Abbate

Thanks. Not really sure what your point is though.

My point is, mainly for the OP to consider, that many of these areas you can "throw a rock" at still haven't recovered from their peak real dollar value back in 2005- despite the tailwind of a massive bull market in the last 8 years. The best Canton zip code I can see is 44718, which is only down about 7.6% where as 44710 is down 42%, since 2005, in real dollars. 

A person putting their money in a mattress would have 42% more buying power with it today than someone who bought a median house in 44710 in 2005.

I understand they've been collecting rent, but the OP needs to see the whole picture, including the appreciation loss, which is why many of these areas are priced the way they are regarding the 1% rule, which is what he was asking about. 

 

 

@Joe Liu as far as population projection data, this site isn't a bad start

http://proximityone.com/demographics2060.htm

Texas, Florida, Utah, Colorado look good. 

They also haven't taken the appreciation beatdown much of the midwest has, but as far as finding the 1% rule I don't know. Most markets are sellers markets and prices are high, so getting good yield in good areas is going to be hard. 

@Joe Liu

I am in your same boat. I live in Yamhill county Oregon and just got under contract for a 4 plex just south of me. Purchase 3.5% down 460k, 2900$ PITI. Rents 950/ unit (3800/mo). I searched high and low and offered on a lot and now I'm almost to close with this one. It's not the best deal since it's fha and I have to occupy it for a year, however in 2 years I should be close to refi equity range and be close to a 1% rule.

Forget the 1% rule just run the full numbers on each property. Some deals aren't good at 1% and need to be 1.5% due to low rents or bad tenant population and other deals can work well below 1% when they have strong tenants and higher rents. 

High rents make cap/ex take up a lower percent. Also be sure to add a column for rent loss in C neighborhoods and below meaning for tenants who don't pay you/evictions. 

2X in Scranton PA? YUP!

You may have heard about real estate in Northeast Pennsylvania (NEPA). The greater Scranton area, and the dozen or so smaller towns around it have great investment and cash-flow potential. The market ranges from A to C- areas and is comprised of mostly single-family to four-plex properties.

Price points are much lower than on the east or west coasts, however, rents are proportionally much higher, leading to positive cash-flow. Example: in NYC, say in Queens, an average 2-family brick house in a C+ neighborhood will cost $800K to $1M. However, the rent for a 3-bedroom apartment is about $2K to $2,500.That’s $5k/mo income total.

In and around Scranton, 2-family houses in a C+ area are in the $80--$100K range. Rents for a 3-bedroom apartment are $800--$900.That’s $1,600/mo+. To make the same rate of return, the NYC property would have to generate $16k/month. Keep in mind, however, here it’s not an ‘appreciation’ play like in NYC or LA—it’s a cash-flow, income-producing play.

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