Is the 1% Rule Dead?

Real Estate Agent · Nashville, TN · Member since 2019 · 376 posts · 181 votes

I say it is, for residential real estate.

It's not 2014 anymore. The real estate game is professionalized, lots of players in the game. And in general, NOI Margins have compressed , and 7% interest rates add insult to injury .

But! Fellow BP compatriots, what say you?

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James Wise

Real Estate Broker · Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH · Member since 2013 · 30k+ posts · 20k+ votes

Quote from @JD Martin:

Quote from @James Wise:

Quote from @Andreas Mueller:

I say it is, for residential real estate.

It's not 2014 anymore. The real estate game is professionalized, lots of players in the game. And in general, NOI Margins have compressed , and 7% interest rates add insult to injury .

But! Fellow BP compatriots, what say you?

It's alive and well in the Ghetto of Cleveland, Detroit, Toledo and other places like that, if you're into that type of thing.

Yeah man, but you're forgetting one thing - Columbus. Where deals are just waiting to be picked like peaches from a tree and there's lots of excellent agents ready to show you how 😛

You did it now bro...........

THEY

ARE

COMING!!!!!!!

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Greg ScottPro Member
Rental Property Investor · SE Michigan · Member since 2014 · 4k+ posts · 6k+ votes
1y
From the beginning, the 1% rule was a problem, even back in 2014.
My first few rentals from way back in 2010 met the 1% rule. Even though they were in decent areas, and I made money on them, those properties were not my best performers. Why? Because I paid full-price for the property, thinking that because it had cashflow, that was all I needed to do. These days I always try to buy under-performing property and add value.
As real estate started to up in value after the GFC, people that followed the 1% rule slowly got relegated to the very worst parts of the city. I saw a post on LinkedIn recently from a guy in Chicago that said SF rentals are for clowns. He had followed the 1% rule and bought Section 8 properties in crime-ridden, drug-infested part of town and then wondered why he wasn't doing well.
The 1% rule may have hurt more people than it helped.
3 Reply
Seth McGatheyBusiness Member
Real Estate Agent · Milwaukee WI · Member since 2024 · 318 posts · 252 votes
1y
I just got the 1% rule last year. $300,000 duplex bringing in just over $3,000 rent. And one of the renters in a longterm tenant that is still a little below market rents. I think the 1% rule is definitely getting harder to find, but whether it is dead or not completely depends on your market.
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Joe VilleneuvePro Member
Plymouth, MI · Member since 2013 · 13k+ posts · 19k+ votes
1y
Dead, gone, and never should have been in existence in the first place.
1 Reply
Bill B.
Investor · Las Vegas, NV · Member since 2013 · 8k+ posts · 10k+ votes
1y
Are you the 100th person to post asking is the 1% rule dead? I think you are…
You can easily make money at 0.6% and you can easily lose money at 1.5%.
3 Reply
James Wise
Real Estate Broker · Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH · Member since 2013 · 30k+ posts · 20k+ votes
1y
Quote from @Andreas Mueller:

I say it is, for residential real estate.
It's not 2014 anymore. The real estate game is professionalized, lots of players in the game. And in general, NOI Margins have compressed , and 7% interest rates add insult to injury .

But! Fellow BP compatriots, what say you?

It's alive and well in the Ghetto of Cleveland, Detroit, Toledo and other places like that, if you're into that type of thing.
4 Reply
- JD MartinBusiness Member
  Moderator
  Rock Star Extraordinaire · Northeast, TN · Member since 2015 · 10k+ posts · 16k+ votes
  1y
  Quote from @James Wise:
  
  Quote from @Andreas Mueller:
  
  I say it is, for residential real estate.
  It's not 2014 anymore. The real estate game is professionalized, lots of players in the game. And in general, NOI Margins have compressed , and 7% interest rates add insult to injury .
  
  But! Fellow BP compatriots, what say you?
  
  It's alive and well in the Ghetto of Cleveland, Detroit, Toledo and other places like that, if you're into that type of thing.
  
  Yeah man, but you're forgetting one thing - Columbus. Where deals are just waiting to be picked like peaches from a tree and there's lots of excellent agents ready to show you how 😛
  Podcast Guest on Show #243
  Skyline Properties
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  3 Reply
- James Wise
  Real Estate Broker · Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH · Member since 2013 · 30k+ posts · 20k+ votes
  1y
  Quote from @JD Martin:
  
  Quote from @James Wise:
  
  Quote from @Andreas Mueller:
  
  I say it is, for residential real estate.
  It's not 2014 anymore. The real estate game is professionalized, lots of players in the game. And in general, NOI Margins have compressed , and 7% interest rates add insult to injury .
  
  But! Fellow BP compatriots, what say you?
  
  It's alive and well in the Ghetto of Cleveland, Detroit, Toledo and other places like that, if you're into that type of thing.
  
  Yeah man, but you're forgetting one thing - Columbus. Where deals are just waiting to be picked like peaches from a tree and there's lots of excellent agents ready to show you how 😛
  
  You did it now bro...........
  THEY
  ARE
  COMING!!!!!!!
  5 Reply
Travis Biziorek
Investor · Arroyo Grande, CA · Member since 2014 · 1k+ posts · 1k+ votes
1y
Still alive and well in Detroit!

I'm based in California now, but I built a 12-door rental portfolio in Detroit before moving back west. I still work with a lot of out-of-state investors helping them do BRRRR deals there.

We’re regularly buying properties in the $80K–$90K range that rent for $1,200–$1,300/month, hitting (and often exceeding) the 1% rule even at today’s interest rates. But like anything, it’s all about buying the right properties in the right areas and having a solid team on the ground.

That said, I definitely agree margins have compressed in most markets—and Detroit isn’t as easy as it was a few years ago either. But the opportunities are still there if you’re willing to dig for them.

Just my two cents from the trenches.
0 Reply
- William Miller
  Member since 2020 · 64 posts · 145 votes
  1y
  @Travis Biziorek we need to connect! I in CA wanting to invest potentially in that area.
  0 Reply
Michael SmytheBusiness Member
Real Estate Agent · Metro Detroit · Member since 2023 · 4k+ posts · 3k+ votes
1y
@Andreas Mueller it's obviously dead for you, which is probably a good thing for your clients.
We keep finding value plays for our clients:)
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Stuart UdisPro Member
Attorney · Philadelphia · Member since 2018 · 2k+ posts · 3k+ votes
1y
The 1% rule was never more than a back of envelope exercise at best. The analysis doesn't take into account expenses which disproportionately impact the lower cost markets. Ironically, its these markets that frequently draw in investors seeking their 1% properties believing they will cash flow XYZ per door allowing them to retire form their W2. I don't hear many of these "success stories".
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Andrew SyriosPro Member
Moderator
Residential Real Estate Investor · Kansas City, MO · Member since 2014 · 10k+ posts · 5k+ votes
1y
Broadly speaking, yes it's (at least mostly) dead. But while it's far better than the 2% rule which was junk, the 1% rule was always way too broad to be particularly helpful.
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Ned CareyPro Member
Moderator
Investor · Baltimore, MD · Member since 2008 · 17k+ posts · 13k+ votes
1y
@Andreas Mueller

Lets presume the 1% rule is valid. What do you mean by is it dead? I suspect you mean you can no longer use it because you can't find deals that meet the 1% rule. This is absurd. The rule is doing exactly what it is supposed to do. It is telling you not to buy.

If you are going to set up criteria and then ignore that criteria then why have criteria in the first place. This isn't about the 1% rule, we could be talking about a full multi year workup of income and expenses. If you are going to keep fudging the numbers until the deal works - what is the point?

Now lets talk about if the 1% rule is valid. It depends on your market and your specific situation and goals. It was never meant as a hard and fast rule it is one of the most crude generalizations out there. However it is extremely useful. Because in 5 seconds I can rule a deal out based on that 1%. Now the exact number you use does not have to be 1% some used to say 2% as @Andrew Syrios said. But if you don't have a number to quickly rule out a deal you will be wasting a ton of time evaluating deals that will go no where.

For years @Joe Villeneuve has posted against the 1% rule (and other rules) but I bet Joe has in his head a way to evaluate in seconds whether something is worth investigating further.

5 Reply
- Andrew SyriosPro Member
  Moderator
  Residential Real Estate Investor · Kansas City, MO · Member since 2014 · 10k+ posts · 5k+ votes
  1y
  Quote from @Ned Carey:
  
  @Andreas Mueller
  
  Lets presume the 1% rule is valid. What do you mean by is it dead? I suspect you mean you can no longer use it because you can't find deals that meet the 1% rule. This is absurd. The rule is doing exactly what it is supposed to do. It is telling you not to buy.
  
  If you are going to set up criteria and then ignore that criteria then why have criteria in the first place. This isn't about the 1% rule, we could be talking about a full multi year workup of income and expenses. If you are going to keep fudging the numbers until the deal works - what is the point?
  
  Now lets talk about if the 1% rule is valid. It depends on your market and your specific situation and goals. It was never meant as a hard and fast rule it is one of the most crude generalizations out there. However it is extremely useful. Because in 5 seconds I can rule a deal out based on that 1%. Now the exact number you use does not have to be 1% some used to say 2% as @Andrew Syrios said. But if you don't have a number to quickly rule out a deal you will be wasting a ton of time evaluating deals that will go no where.
  
  For years @Joe Villeneuve has posted against the 1% rule (and other rules) but I bet Joe has in his head a way to evaluate in seconds whether something is worth investigating further.
  
  This is a good way to put it. The 1% rule (or whatever rule) was never about (or at least never should have been about) evaluating deals. It was always about sifting out clearly bad ones to save time.
  Podcast Guest on Show #121
  3 Reply
- Joe VilleneuvePro Member
  Plymouth, MI · Member since 2013 · 13k+ posts · 19k+ votes
  11mo
  Quote from @Ned Carey:
  
  @Andreas Mueller
  
  Lets presume the 1% rule is valid. What do you mean by is it dead? I suspect you mean you can no longer use it because you can't find deals that meet the 1% rule. This is absurd. The rule is doing exactly what it is supposed to do. It is telling you not to buy.
  
  If you are going to set up criteria and then ignore that criteria then why have criteria in the first place. This isn't about the 1% rule, we could be talking about a full multi year workup of income and expenses. If you are going to keep fudging the numbers until the deal works - what is the point?
  
  Now lets talk about if the 1% rule is valid. It depends on your market and your specific situation and goals. It was never meant as a hard and fast rule it is one of the most crude generalizations out there. However it is extremely useful. Because in 5 seconds I can rule a deal out based on that 1%. Now the exact number you use does not have to be 1% some used to say 2% as @Andrew Syrios said. But if you don't have a number to quickly rule out a deal you will be wasting a ton of time evaluating deals that will go no where.
  
  For years @Joe Villeneuve has posted against the 1% rule (and other rules) but I bet Joe has in his head a way to evaluate in seconds whether something is worth investigating further.
  
  Very well put. I prefer the 2% over 1%, but only if we're talking about milk.
  ...and yes, I do have a formula I use to do an analysis on a property, but it's not a "quick" one. I don't use "rules" or "guidelines" to evaluate properties. Properties values are a result of the market. Any single property analysis, without the market analysis leading you to that property, is just guessing.
  2 Reply
Marcus Auerbach
Investor · Milwaukee - Mequon, WI · Member since 2010 · 5k+ posts · 7k+ votes
1y
Real estate has a dynamic pricing model: the higher the risks and baggage, the lower the price. I live in one of the best "cash flow markets" and I have been buying under 1% for the last 10 years.
Typically around a 0.8 ratio, while you could still find 2% deals back in 2015.
Why? Because I like quality properties in good locations and school districts that are desirable to nice tenants with stable lives (which is a level up from stable income). They stay many years, it minimizes my headache factor (and with that overhead expenses), our vacancy rate is close to zero and I am in neighborhoods that appreciate really well.
And I own assets that would be easy to liquidate if I ever wanted. If you buy a deal from a motivated seller for a really low price, understand that you are trading places with the seller in exchange for money.
1 Reply
David Krulac
Mechanicsburg, PA · Member since 2013 · 3k+ posts · 2k+ votes
1y
Just bought a property with 4.75% interest fixed for 30 years, and bought two properties with 4.25% interest fixed for 10 years and then variable for 20 more years. Also bought a house for $155,000 that will rent for $1,585.
2 Reply
Russell BrazilBusiness Member
Moderator
Real Estate Agent · Washington, D.C. · Member since 2012 · 17k+ posts · 30k+ votes
1y
Yes
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Kate Sanchez
Member since 2025 · 244 posts · 99 votes
1y
@Andreas Mueller Great topic! The 1% rule isn’t dead it’s just harder to find. Creative strategy, patience, and strong market knowledge are more important than ever.
1 Reply
Chris SeveneyBusiness Member
Moderator
Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes
1y
Quote from @Andreas Mueller:

I say it is, for residential real estate.
It's not 2014 anymore. The real estate game is professionalized, lots of players in the game. And in general, NOI Margins have compressed , and 7% interest rates add insult to injury .

But! Fellow BP compatriots, what say you?
I say it is, for residential real estate, absolutely.
It is not 2014 anymore. The landscape has changed. The game is professionalized, competition is fierce, and the easy wins are gone. We are officially in the phase where skill separates the haves from the have nots. Over the last five years, cheap money covered up a lot of mistakes. Now, with cap rate compression and 7 percent interest rates, those mistakes have nowhere to hide.
NOI margins are tighter, debt is expensive, and execution matters more than ever. This is where operators who truly understand asset management, financing, and local market dynamics will rise.

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Aaron ZimmermanBusiness Member
Accountant · Chicago, IL · Member since 2018 · 2k+ posts · 1k+ votes
1y
I just got 1.5% rule in December 2023. We had a bit of stabilization period. But now it's 1.5% 1.5 years later and cash flowing nicely.
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Account Closed
Real Estate Agent · Middle TN · Member since 2021 · 16 posts · 6 votes
1y
With margins tighter and interest rates up, the game has gotten tougher. But there’s still opportunity just requires more strategy. I’m personally looking at value add deals and markets with strong fundamentals. Multifamily and short-term rentals seem to be gaining traction too.
1 Reply
James Wise
Real Estate Broker · Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH · Member since 2013 · 30k+ posts · 20k+ votes
11mo
Quote from @Andreas Mueller:

I say it is, for residential real estate.
It's not 2014 anymore. The real estate game is professionalized, lots of players in the game. And in general, NOI Margins have compressed , and 7% interest rates add insult to injury .

But! Fellow BP compatriots, what say you?

1% rule still here. In 2014 it was like 2%/3% rule.
0 Reply
- Ned CareyPro Member
  Moderator
  Investor · Baltimore, MD · Member since 2008 · 17k+ posts · 13k+ votes
  11mo
  Quote from @James Wise:
  
  Quote from @Andreas Mueller:
  
  I say it is, for residential real estate.
  It's not 2014 anymore. The real estate game is professionalized, lots of players in the game. And in general, NOI Margins have compressed , and 7% interest rates add insult to injury .
  
  But! Fellow BP compatriots, what say you?
  
  1% rule still here. In 2014 it was like 2%/3% rule.
  
  Funny all the people that laughed when we said 2% rule back then. But all the people buying the same properties at 1% are now losing their shirts.
  Maybe we should call it the 1% Guideline, instead of rule. (you can insert whatever % you deem appropriate for your goals and market.)
  2 Reply
- James Wise
  Real Estate Broker · Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH · Member since 2013 · 30k+ posts · 20k+ votes
  11mo
  Quote from @Ned Carey:
  
  Quote from @James Wise:
  
  Quote from @Andreas Mueller:
  
  I say it is, for residential real estate.
  It's not 2014 anymore. The real estate game is professionalized, lots of players in the game. And in general, NOI Margins have compressed , and 7% interest rates add insult to injury .
  
  But! Fellow BP compatriots, what say you?
  
  1% rule still here. In 2014 it was like 2%/3% rule.
  
  Funny all the people that laughed when we said 2% rule back then. But all the people buying the same properties at 1% are now losing their shirts.
  Maybe we should call it the 1% Guideline, instead of rule. (you can insert whatever % you deem appropriate for your goals and market.)
  
  Those were the days man. Buying $140,000 duplexes for like $30k. We were Kings.....
  1 Reply
- Joe VilleneuvePro Member
  Plymouth, MI · Member since 2013 · 13k+ posts · 19k+ votes
  11mo
  Quote from @James Wise:
  
  Quote from @Ned Carey:
  
  Quote from @James Wise:
  
  Quote from @Andreas Mueller:
  
  I say it is, for residential real estate.
  It's not 2014 anymore. The real estate game is professionalized, lots of players in the game. And in general, NOI Margins have compressed , and 7% interest rates add insult to injury .
  
  But! Fellow BP compatriots, what say you?
  
  1% rule still here. In 2014 it was like 2%/3% rule.
  
  Funny all the people that laughed when we said 2% rule back then. But all the people buying the same properties at 1% are now losing their shirts.
  Maybe we should call it the 1% Guideline, instead of rule. (you can insert whatever % you deem appropriate for your goals and market.)
  
  Those were the days man. Buying $140,000 duplexes for like $30k. We were Kings.....
  No, "Wise" men.
  0 Reply

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