Is the 1% rule dead in 2023 ?

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Is the 1% rule dead in 2023 ?

Rakesh Balavanthapu
Investor · Atlanta, GA · Member since 2023 · 8 posts · 16 votes

I am a new to REI and trying to find my first deal. Have been listening to BP podcast episodes from 2020 and earlier and the numbers were no where near what they are today.

I have analyzed about 30 deals in Atlanta, Dallas and Columbus markets. Couldn't find a single property where it is meeting the 1% rule. Agreed that I looked at only MLS listings, but still.

Am I looking in the wrong place ? Or am I making any mistakes in my analysis? Not sure where to go from here.

Also, is there a place on BP where we can find market analysis? I am a pro member. 
Please let me know how you guys are dealing with this

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V.G JasonPro Member
Investor · Member since 2022 · 3k+ posts · 3k+ votes
3y

It's been dead, dude. Where have you been?

The 1% rule originated fresh off the hardest crash in over leveraged real estate coupled with the lowest interest rates. That's not a consistent theme to bet on, that's an aberration. 

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  • Simon Ashbaugh
    Realtor · Columbus Ohio, Cleveland Ohio · Member since 2022 · 849 posts · 830 votes
    3y
    Quote from @Rakesh Balavanthapu:

    I am a new to REI and trying to find my first deal. Have been listening to BP podcast episodes from 2020 and earlier and the numbers were no where near what they are today.

    I have analyzed about 30 deals in Atlanta, Dallas and Columbus markets. Couldn't find a single property where it is meeting the 1% rule. Agreed that I looked at only MLS listings, but still.

    Am I looking in the wrong place ? Or am I making any mistakes in my analysis? Not sure where to go from here.

    Also, is there a place on BP where we can find market analysis? I am a pro member. 
    Please let me know how you guys are dealing with this


     You can still find 1% rules in columbus. If you want to go any higher you should probably look into cleveland. 

    0Reply
  • Alfath AhmedBusiness Member
    Real Estate Agent · Columbus, OH · Member since 2022 · 1k+ posts · 1k+ votes
    3y

    It's easy even in today's market to find the 1% rule in c-class properties. It's definitely a lot harder to that in properties where demand is very strong. 

    Let's connect, I can definitely explain the Columbus market better and how you can strategize to obtain your desired ROI.

    [email protected]614-802-5698
    ReafCo | Ahmed Group 530 Reviews
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    1Reply
  • Chad Gallagher
    Rental Property Investor · mid atlantic · Member since 2017 · 197 posts · 106 votes
    3y

    They metric we teach is IRR. As we see it, this does the best way to incorporate everything about an investment into one metric. Historically, we wanted to see IRR around 15% for our investments --- taking into account financing. With interest higher, we are now seeing 13-14% is a more reasonable target, assuming rates dont come down in the future.

    We are closing this week on a B Class property that is 13.5% IRR, $145K, will rent for $1500. We actually got this off the MLS, so it wasn't some off market deal. So, to your point, it is still possible to find a property at 1% of the rent, but I dont think that should be the overall metric of choice when trying to find an investment.

    1Reply
  • Lindsay DavisBusiness Member
    Real Estate Broker · Birmingham, AL · Member since 2019 · 326 posts · 201 votes
    3y

    @Rakesh Balavanthapu,

    It’s definitely difficult to find a property that meets the 1% rule in cities like Atlanta, Dallas, or Columbus in this environment.

    If you’re willing to look beyond these three metro areas, however, deals that meet the 1% rule are alive and well.

    For example, a good number of properties in cities like Birmingham or Tuscaloosa, Alabama will meet the 1% rule, even in B/B+ neighborhoods. Though you might need to do some digging, it’s not impossible to find a property for $120,000 that rents for $1,200+ a month. Hope this was helpful, and let me know if you have any other questions!

    205-205-4118
    Spartan Invest4.8134 Reviews
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    1Reply
  • Tim Ryan
    Investor / Mentor / Contractor · Arcadia, CA Buying Out of State · Member since 2015 · 654 posts · 622 votes
    3y

    There is always a growth market somewhere. Maybe Atlanta is not it - I don't know.  Keep looking but plan to bear down in one or maybe two markets at a time. I work only one at a time.  I'm still getting 1-2% rule.

    0Reply
  • Tamera White
    Rental Property Investor · Raleigh, NC · Member since 2022 · 33 posts · 23 votes
    3y

    Chris

    Just read your May message today 7/25. I have changed notifications. I really enjoyed reading your detailed and personal reply. Please message me your phone and I'll call to connect. Looking to get started in Ohio. Thank you!

    1Reply
  • Austin Steed
    Real Estate Agent · Columbus, OH · Member since 2016 · 593 posts · 664 votes
    3y

    In Columbus I see it less and less. I always recommend that you run numbers on a proforma basis. 

    So once the property is rehabbed fully stabilized is when you can see the 1% rule on your purchase and rehab costs. 

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