1% Rule and Apartments (multi family)

[Thomas Willingham]

Does 1% hold true for apartments?

Looking for my first small apartment complex ($1m-$2m) and just can't seem to make the number work out.  Everything I have found on or off market, even if it is priced at or below the 1% rule (monthly rent roll 1% of price), it works out as negative cash flow by the time I add in Mortgage, Taxes/Ins, maint, management, etc.  I'm either missing something, or finding a multi family priced reasonably is impossible.

This is my first multi- family, but I've done SFR and commercial for about 20y. I'm feeling like I just need to stay in my lane and stick with commercial.

[Greg Scott]

You should be able to find property that cash flows.  I've never heard anyone using the 1% rule on an apartment.

Using a somewhat typical 5% Cap Rate and a 50% Expense ratio, would give you a monthly rent to value of 0.83%.  At a 50% Expense ratio, you need a 6 Cap to achieve 1%.  They are out there but hard to find or are in bad areas.