Is the 1% rule dead in today’s market?

Hinton, WV · Member since 2026 · 9 posts · 7 votes

Been analyzing a lot of rental properties lately and I keep noticing the same thing:

In a huge number of markets, deals that would’ve worked a few years ago barely break even now once you factor in current rates, taxes, insurance, maintenance, vacancy, and repairs. A property that rents for $2,000/month used to feel decent at ~$200k. Now I’ll see similar homes listed at $320k-$400k with worse financing. At the same time, I still occasionally find deals that cash flow surprisingly well — usually in secondary markets, smaller metros, or properties most people scroll past.

So I’m curious where everyone stands right now: Are you still using the 1% rule at all? Have your buy criteria changed since rates jumped? Are people adapting or just forcing deals to work on paper?

I’m starting to think the bigger issue isn’t bad investors, it’s that a lot of people are underwriting based on appreciation assumptions instead of actual cash flow now.

Would genuinely love to hear what markets and strategies are still penciling out for people here.

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Bill B.

Investor · Las Vegas, NV · Member since 2013 · 8k+ posts · 10k+ votes

5mo

The 1% “rule” is 18 years old, back when interest rates were around 6%.

It was created for small market in Washington with low taxes and insurance and no HOAs.

Anyone who applied it outside of that market might not have known that? Can you imagine the fool that applied it to a $40k, 100 year old home in the Midwest? About his neighbor the fool who applied it to a $120k ski condo with a $600/mo HOA? And lastly their uncle who tried it on a $200k 4plex with $4,000/year insurance and $5,000/year property taxes?

When that rule “came out” you could crush it in Vegas with 0.8% and make money at 0.7%. But we have “young” properties with cheap insurance, low property taxes, a community of young renters, and no state income tax.

You have to make a rule for your property type, in your price range, in your market. Ask anyone with several properties in one market and they can tell you 15 seconds if they’re interested in a property. (Ps. The 1% rule was ONLY meant to tell you if you should research it all BTW. It was NOT a sign to buy or not buy. It was meant to show you a better than average properties, not minimum requirements.)

Lastly the cheaper the property the higher the rent to price ratio and the less money you’ll make overall. (It HAS to go down as prices increase or NOBODY would rent out 10 $500k homes when they could make just as much with one $5M homes.

People have been calling the 1%brule “dead: for at least 10 years with zero research. Search for 1% dead on BP, it might be more than 10 years. I think they just want an excuse not to start investing.

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Bill B.
Investor · Las Vegas, NV · Member since 2013 · 8k+ posts · 10k+ votes
5mo
The 1% “rule” is 18 years old, back when interest rates were around 6%.
It was created for small market in Washington with low taxes and insurance and no HOAs.
Anyone who applied it outside of that market might not have known that? Can you imagine the fool that applied it to a $40k, 100 year old home in the Midwest? About his neighbor the fool who applied it to a $120k ski condo with a $600/mo HOA? And lastly their uncle who tried it on a $200k 4plex with $4,000/year insurance and $5,000/year property taxes?
When that rule “came out” you could crush it in Vegas with 0.8% and make money at 0.7%. But we have “young” properties with cheap insurance, low property taxes, a community of young renters, and no state income tax.
You have to make a rule for your property type, in your price range, in your market. Ask anyone with several properties in one market and they can tell you 15 seconds if they’re interested in a property. (Ps. The 1% rule was ONLY meant to tell you if you should research it all BTW. It was NOT a sign to buy or not buy. It was meant to show you a better than average properties, not minimum requirements.)
Lastly the cheaper the property the higher the rent to price ratio and the less money you’ll make overall. (It HAS to go down as prices increase or NOBODY would rent out 10 $500k homes when they could make just as much with one $5M homes.
People have been calling the 1%brule “dead: for at least 10 years with zero research. Search for 1% dead on BP, it might be more than 10 years. I think they just want an excuse not to start investing.
3 Reply
Cayden Campbell
OP
Hinton, WV · Member since 2026 · 9 posts · 7 votes
5mo
That actually makes a lot of sense, especially the point about the 1% rule being more of a filtering shortcut than an actual buy signal. I think part of why it gets debated so much now is that financing costs changed so quickly that a lot of people who got used to “good enough” numbers suddenly started seeing deals barely work at all.

The market-specific point is huge too. A deal that looks terrible in one market might work perfectly fine somewhere else once taxes, insurance, HOA costs, tenant base, and maintenance realities are factored in. I've also noticed what you mentioned about lower-priced properties sometimes having stronger rent ratios but not necessarily being better overall investments once you factor in headaches, age, and operating costs.

1 Reply
Alex Olson
Real Estate Broker · Kansas City Metro · Member since 2015 · 2k+ posts · 1k+ votes
5mo
Can get 1% or better in plenty of areas in KC. Might be class b- or c sub market but a good amount to choose from.
0 Reply
Enzo Giuliani
Member since 2026 · 12 posts · 7 votes
5mo
Bill B.'s point about the 1% rule being market- and property-specific is spot on — applying it universally was always a mistake, but the bigger issue right now is investors who aren't adjusting their buy criteria to account for today's debt service costs on a 7%+ mortgage. The markets that still pencil out (secondary Midwest cities, certain parts of the Southeast) often have the cash flow fundamentals, but only if you're buying at the right price rather than competing for every deal. Your instinct about appreciation-driven underwriting being the hidden problem is worth repeating — a deal that only works if values keep climbing is speculation, not investing.
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JM Michiels
New to Real Estate · UK · Member since 2026 · 7 posts · 2 votes
5mo
The 1% rule isn't dead — it's just incomplete.

It was never meant to be the final answer, just a quick filter to eliminate obvious bad deals before doing real analysis. The problem is too many investors use it as the only metric.

What actually matters is the full cashflow picture: net yield after mortgage, maintenance, insurance and management fees. A property that passes the 1% rule can still cashflow negative depending on your financing terms. And a property that fails the 1% rule can still be a great appreciation play in the right market.

The rule of thumb era is fading. Investors who are winning right now are the ones doing proper deal analysis on every single property before making any decision — not relying on shortcuts.
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Christian Grosskopf
Investor · Louisville, KY · Member since 2017 · 92 posts · 38 votes
5mo
It's certainly not dead in certain markets but it's fading away in most markets. You can get pretty close to the "1% Rule" using a strategy like BRRRR where you add a lot of value and equity into a home by renovating it and demanding a rental price that can come close to 1% of the reappraised value. But this requires a lot more time, resources, and collaboration. Gone are the days of hopping on the MLS and finding a property that just needs new floors and paint and expecting to get a great return on investment.
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Jake YuskaitisBusiness Member
Lender · New Jersey, USA · Member since 2022 · 254 posts · 67 votes
5mo
it's a fine rule of thumb but it really requires nuance as all deals need their own evaluation.
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Dominic Mazzarella
Investor · Hendersonville, NC · Member since 2016 · 498 posts · 285 votes
5mo
Quote from @Cayden Campbell:
Been analyzing a lot of rental properties lately and I keep noticing the same thing:

In a huge number of markets, deals that would’ve worked a few years ago barely break even now once you factor in current rates, taxes, insurance, maintenance, vacancy, and repairs. A property that rents for $2,000/month used to feel decent at ~$200k. Now I’ll see similar homes listed at $320k-$400k with worse financing. At the same time, I still occasionally find deals that cash flow surprisingly well — usually in secondary markets, smaller metros, or properties most people scroll past.

So I’m curious where everyone stands right now: Are you still using the 1% rule at all? Have your buy criteria changed since rates jumped? Are people adapting or just forcing deals to work on paper?

I’m starting to think the bigger issue isn’t bad investors, it’s that a lot of people are underwriting based on appreciation assumptions instead of actual cash flow now.

Would genuinely love to hear what markets and strategies are still penciling out for people here.
The 1% rule is mostly a quick smell test now, not something I’d make decisions from. If a deal hits it, great, but I still care way more about the actual expenses, debt terms, tenant quality, repairs, and whether the rent number is real.

I also think a lot of people are “finding cash flow” by moving into rougher markets or rougher properties without pricing in the extra headache. Sometimes that works, but usually the spreadsheet looks good because the risk is being ignored.
1 Reply
Arman AhmedPro Member
Real Estate Agent · Columbus Cleveland Dayton, OH · Member since 2024 · 2k+ posts · 961 votes
5mo
Quote from @Cayden Campbell:
Been analyzing a lot of rental properties lately and I keep noticing the same thing:

In a huge number of markets, deals that would’ve worked a few years ago barely break even now once you factor in current rates, taxes, insurance, maintenance, vacancy, and repairs. A property that rents for $2,000/month used to feel decent at ~$200k. Now I’ll see similar homes listed at $320k-$400k with worse financing. At the same time, I still occasionally find deals that cash flow surprisingly well — usually in secondary markets, smaller metros, or properties most people scroll past.

So I’m curious where everyone stands right now: Are you still using the 1% rule at all? Have your buy criteria changed since rates jumped? Are people adapting or just forcing deals to work on paper?

I’m starting to think the bigger issue isn’t bad investors, it’s that a lot of people are underwriting based on appreciation assumptions instead of actual cash flow now.

Would genuinely love to hear what markets and strategies are still penciling out for people here.
I don’t think the 1% rule is completely dead, but it’s definitely not as common in major markets anymore unless there’s value-add, creative financing, or operational upside. What’s changed is that a lot of investors got used to appreciation carrying weak cash flow, and higher rates exposed that pretty quickly. The deals that still really work tend to be in secondary and Midwest markets where pricing hasn’t completely disconnected from rents yet. A lot of out-of-state investors are adapting by getting more conservative on underwriting, focusing harder on cash flow, and buying properties with multiple exit strategies instead of assuming the market will bail them out later.
[email protected]614-418-6081
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- Cayden Campbell
  OP
  Hinton, WV · Member since 2026 · 9 posts · 7 votes
  5mo
  Interesting hearing that from someone actually working those markets day-to-day. I’ve noticed more people talking about Midwest cash flow lately for the exact reasons you mentioned.
  
  Are you seeing more out-of-state investors coming in now compared to a few years ago, or mostly local buyers adapting to the rate environment?
  0 Reply
Jeff Roth
Real Estate Consultant · Ann Arbor, MI · Member since 2022 · 469 posts · 260 votes
5mo
Hi Cayden from Hinton, WV-
Great question! Is the 1% rule dead in today's market?
The 1% rule being that purchase price (including renovations) should not exceed 1% of gross rents.
No, the 1% rule is not dead and should be the floor and not the ceiling when using it as a rule of thumb when evaluation a potential deal with a first pass.
There are many markets in Michigan where gross rents still exceed purchase price and we help investors invest for both cashflow and appreciation.
To Your Success!
1 Reply
- Cayden Campbell
  OP
  Hinton, WV · Member since 2026 · 9 posts · 7 votes
  5mo
  Quote from @Jeff Roth:
  
  Hi Jeff,
  
  Thank you for the kind words. That’s interesting, especially the point about using it as a first-pass filter instead of a hard buy rule. I think a lot of newer investors saw the 1% rule almost as a guarantee of a good deal, when in reality financing, taxes, insurance, and capex can completely change the picture now.
  Michigan definitely seems like one of the markets where the numbers can still make sense compared to a lot of higher-priced areas. Are you mostly seeing opportunities in smaller cities/suburbs there, or even in some of the larger metros too?
  
  0 Reply
Nadean Willis
Lender · Jacksonville, FL · Member since 2026 · 46 posts · 17 votes
5mo
Quote from @Cayden Campbell:
Been analyzing a lot of rental properties lately and I keep noticing the same thing:

In a huge number of markets, deals that would’ve worked a few years ago barely break even now once you factor in current rates, taxes, insurance, maintenance, vacancy, and repairs. A property that rents for $2,000/month used to feel decent at ~$200k. Now I’ll see similar homes listed at $320k-$400k with worse financing. At the same time, I still occasionally find deals that cash flow surprisingly well — usually in secondary markets, smaller metros, or properties most people scroll past.

So I’m curious where everyone stands right now: Are you still using the 1% rule at all? Have your buy criteria changed since rates jumped? Are people adapting or just forcing deals to work on paper?

I’m starting to think the bigger issue isn’t bad investors, it’s that a lot of people are underwriting based on appreciation assumptions instead of actual cash flow now.

Would genuinely love to hear what markets and strategies are still penciling out for people here.
One of my lending clients consistently finds deals in LA and OK with a 3% Rule. He also doesn't buy in rural areas. It's wild that he can find them with such great numbers.
1 Reply
Cayden Campbell
OP
Hinton, WV · Member since 2026 · 9 posts · 7 votes
5mo
I think that’s the part a lot of newer investors underestimate. A deal can look okay until you stress test it a little. One vacancy, one big repair, or a bad turnover suddenly changes the whole picture.

Feels like there’s a much smaller margin for error now than there used to be.
0 Reply
JM Michiels
New to Real Estate · UK · Member since 2026 · 7 posts · 2 votes
5mo
Exactly right — BRRRR is one of the few strategies left where you can still manufacture the numbers rather than just hoping to find them on the MLS.

The forced equity component changes everything. You're essentially creating your own deal instead of competing for deals that everyone else can see. The challenge is that it requires a completely different skill set — project management, contractor relationships, accurate rehab estimation — which most passive investors don't have or don't want.

That's why I think the market is splitting into two types of investors right now: those who can add value through renovation and those who need to be much more rigorous about their upfront analysis to find the rare cashflow-positive deals that still exist at market price. The middle ground of "buy a decent property and it'll work out" is basically gone.
0 Reply
Marcus Auerbach
Investor · Milwaukee - Mequon, WI · Member since 2010 · 5k+ posts · 7k+ votes
5mo
Let's call it the 0.8% rule going forward.
Investors have always cooked their own numbers to justify their decisions. "Look, I found a 1% deal" - let's not talk about the fact that the roof is at it's end, the windows are original and the kitchen is from the 60s. And only a desperate tenant with no appreciation for a nice or clean home will rent it.
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Leo CarterPro Member
Member since 2025 · 27 posts · 22 votes
5mo
Personally, I still look at the 1% rule, but more as a quick filter than a hard rule. In today’s rate environment, anything under that usually needs another angle to make sense — value add, low taxes, strong appreciation potential, short-term/mid-term rental strategy, etc.
1 Reply
JM Michiels
New to Real Estate · UK · Member since 2026 · 7 posts · 2 votes
5mo
Replying to the "0.8% rule" comment above — that's a fair point and honestly undersells how bad the problem is.

The 1% rule was always vulnerable to this because it only looks at the top line rent versus purchase price. It tells you nothing about the condition of the asset, the quality of the tenant it will attract, or the capex lurking underneath.

The investors I've seen get burned aren't the ones who ignored the 1% rule — they're the ones who hit it and stopped there. Found their 1% deal, got excited, and completely skipped the full underwriting. Deferred maintenance, below-market tenants, and a roof that needed replacing in year two wiped out three years of cashflow in one hit.

The rule of thumb was always a filter, not a verdict. The problem is too many people treated it like a finish line.
0 Reply
Jimmy LieuBusiness Member
Real Estate Agent · Columbus, OH · Member since 2019 · 3k+ posts · 2k+ votes
5mo
Quote from @Cayden Campbell:
Been analyzing a lot of rental properties lately and I keep noticing the same thing:

In a huge number of markets, deals that would’ve worked a few years ago barely break even now once you factor in current rates, taxes, insurance, maintenance, vacancy, and repairs. A property that rents for $2,000/month used to feel decent at ~$200k. Now I’ll see similar homes listed at $320k-$400k with worse financing. At the same time, I still occasionally find deals that cash flow surprisingly well — usually in secondary markets, smaller metros, or properties most people scroll past.

So I’m curious where everyone stands right now: Are you still using the 1% rule at all? Have your buy criteria changed since rates jumped? Are people adapting or just forcing deals to work on paper?

I’m starting to think the bigger issue isn’t bad investors, it’s that a lot of people are underwriting based on appreciation assumptions instead of actual cash flow now.

Would genuinely love to hear what markets and strategies are still penciling out for people here.
You’re pretty much seeing what a lot of investors are running into right now. The 1% rule still gets used, but more as a quick screening tool than a hard requirement, because in a lot of metros it just doesn’t show up consistently anymore unless you’re looking at older housing stock or very specific pockets. Most people I know have shifted their underwriting to focus more on real cash flow metrics like cash-on-cash return, DSCR, and stress testing at today’s rates with realistic insurance, taxes, vacancy, and capex instead of trying to force a rule of thumb to work. What’s also changed is that a lot of deals only “work” if appreciation is assumed, which is where things can get risky if the hold period is long and the market flattens. The investors still getting deals done tend to be either buying in smaller or secondary markets where pricing hasn’t fully caught up, or they’re going value-add where forced equity improves the numbers after purchase. So I wouldn’t say you’re overanalyzing, it’s more that the baseline has shifted and you have to be more selective on both the purchase price and the assumptions going in.
[email protected]614-300-7535
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0 Reply
- JM Michiels
  New to Real Estate · UK · Member since 2026 · 7 posts · 2 votes
  5mo
  Quote from @Jimmy Lieu:
  
  Quote from @Cayden Campbell:
  
  Been analyzing a lot of rental properties lately and I keep noticing the same thing:
  
  In a huge number of markets, deals that would’ve worked a few years ago barely break even now once you factor in current rates, taxes, insurance, maintenance, vacancy, and repairs. A property that rents for $2,000/month used to feel decent at ~$200k. Now I’ll see similar homes listed at $320k-$400k with worse financing. At the same time, I still occasionally find deals that cash flow surprisingly well — usually in secondary markets, smaller metros, or properties most people scroll past.
  
  So I’m curious where everyone stands right now: Are you still using the 1% rule at all? Have your buy criteria changed since rates jumped? Are people adapting or just forcing deals to work on paper?
  
  I’m starting to think the bigger issue isn’t bad investors, it’s that a lot of people are underwriting based on appreciation assumptions instead of actual cash flow now.
  
  Would genuinely love to hear what markets and strategies are still penciling out for people here.
  You’re pretty much seeing what a lot of investors are running into right now. The 1% rule still gets used, but more as a quick screening tool than a hard requirement, because in a lot of metros it just doesn’t show up consistently anymore unless you’re looking at older housing stock or very specific pockets. Most people I know have shifted their underwriting to focus more on real cash flow metrics like cash-on-cash return, DSCR, and stress testing at today’s rates with realistic insurance, taxes, vacancy, and capex instead of trying to force a rule of thumb to work. What’s also changed is that a lot of deals only “work” if appreciation is assumed, which is where things can get risky if the hold period is long and the market flattens. The investors still getting deals done tend to be either buying in smaller or secondary markets where pricing hasn’t fully caught up, or they’re going value-add where forced equity improves the numbers after purchase. So I wouldn’t say you’re overanalyzing, it’s more that the baseline has shifted and you have to be more selective on both the purchase price and the assumptions going in.
  
  This is exactly right — the shift from rule-of-thumb screening to real underwriting is the defining change of the last 18 months.
  
  The DSCR focus is particularly important right now. A deal that technically "cashflows" at a 5% rate looks completely different stress-tested at 7%, and most investors aren't running that scenario before committing.
  
  The appreciation assumption problem is the one that worries me most. It's invisible in the underwriting until it isn't — and by then you're locked into a 25-year mortgage on an asset that needs the market to cooperate.
  
  Value-add and secondary markets are where I'm seeing the most realistic numbers too. The math just works better when you're creating equity rather than hoping to find it already priced in.
  
  I've actually been building a tool around this exact problem — deterministic cashflow analysis so you can stress-test deals in seconds without touching a spreadsheet. If you're running a lot of deals through numbers regularly, free to try at myinvestiq.app 👍
  0 Reply
- JM Michiels
  New to Real Estate · UK · Member since 2026 · 7 posts · 2 votes
  5mo
  Quote from @Jimmy Lieu:
  
  Quote from @Cayden Campbell:
  
  Been analyzing a lot of rental properties lately and I keep noticing the same thing:
  
  In a huge number of markets, deals that would’ve worked a few years ago barely break even now once you factor in current rates, taxes, insurance, maintenance, vacancy, and repairs. A property that rents for $2,000/month used to feel decent at ~$200k. Now I’ll see similar homes listed at $320k-$400k with worse financing. At the same time, I still occasionally find deals that cash flow surprisingly well — usually in secondary markets, smaller metros, or properties most people scroll past.
  
  So I’m curious where everyone stands right now: Are you still using the 1% rule at all? Have your buy criteria changed since rates jumped? Are people adapting or just forcing deals to work on paper?
  
  I’m starting to think the bigger issue isn’t bad investors, it’s that a lot of people are underwriting based on appreciation assumptions instead of actual cash flow now.
  
  Would genuinely love to hear what markets and strategies are still penciling out for people here.
  You’re pretty much seeing what a lot of investors are running into right now. The 1% rule still gets used, but more as a quick screening tool than a hard requirement, because in a lot of metros it just doesn’t show up consistently anymore unless you’re looking at older housing stock or very specific pockets. Most people I know have shifted their underwriting to focus more on real cash flow metrics like cash-on-cash return, DSCR, and stress testing at today’s rates with realistic insurance, taxes, vacancy, and capex instead of trying to force a rule of thumb to work. What’s also changed is that a lot of deals only “work” if appreciation is assumed, which is where things can get risky if the hold period is long and the market flattens. The investors still getting deals done tend to be either buying in smaller or secondary markets where pricing hasn’t fully caught up, or they’re going value-add where forced equity improves the numbers after purchase. So I wouldn’t say you’re overanalyzing, it’s more that the baseline has shifted and you have to be more selective on both the purchase price and the assumptions going in.
  
  This is exactly right — the shift from rule-of-thumb screening to real underwriting is the defining change of the last 18 months.
  
  The DSCR focus is particularly important right now. A deal that cashflows at 5% stress-tested at 7% looks completely different, and most investors aren't running that scenario before committing.
  
  The appreciation assumption problem is the one that worries me most — it's invisible in the underwriting until it isn't, and by then you're locked into a 25-year mortgage on an asset that needs the market to cooperate.
  
  Value-add and secondary markets are where the most realistic numbers are right now. The math just works better when you're creating equity rather than hoping to find it already priced in.
  
  I actually built a free tool around this exact problem — deterministic cashflow analysis so you can stress-test deals in seconds without touching a spreadsheet. Free at myinvestiq.app if you want to try it 👍
  0 Reply
Theresa HarrisPro Member
Member since 2019 · 15k+ posts · 11k+ votes
5mo
Where I am, I've not seen a place that rents for $2k/month sell for $200k for more than 5 years. One of the markets I have rentals in would now rent for $2K/month, but cost just over $200K 10 years ago. I've never used the 1% rule, I run the numbers and see if it makes sense for me.
0 Reply
Nick Sansivero
Rental Property Investor · Wilmington, NC · Member since 2019 · 69 posts · 51 votes
5mo
@Cayden Campbell I'm seeing the average rent to price ratio across markets right now is about 0.45%. It's unlikely that you'll find a market that hits the 1% rule these days. It's still a useful metric for quick comparisons for cash flow potential, but I'd recommend to not get too caught up on the 1% rule. It should be one of many metrics you study when choosing a market. At Tenantry.ai we offer 50+ key investor metrics that will help you identify markets for cash flow and appreciation potential.

0 Reply
Hasan Gabareen
Rental Property Investor · Palo Alto, CA · Member since 2026 · 42 posts · 22 votes
5mo
The obsession with the 1% rule or debating a 0.8% rule highlights a bigger issue: investors are still trying to underwrite volatile assets using static, one-dimensional shortcuts.

In a high-rate environment, a high rent to price ratio isn't a safety net—it’s usually a risk premium in disguise. A deal on a spreadsheet can look incredible right up until a localized expense spike or an extended vacancy eats your entire margin.

The rule-of-thumb era is dead because the margin for error is gone. Winning right now requires shifting to a strict macro-micro risk framework:
- The Macro Floor - You have to underwrite the submarket’s net migration, wage growth, and historical asset resilience before looking at the property. A 1.2% rent ratio in a decaying macro market is just subsidizing your future equity loss.
- The Micro Friction - You must stop using flat, arbitrary 5% or 10% line items for expenses. Insurance, hyper-local tax reassessments, and Capex profiles are too volatile for guesswork.
- Deterministic Scenario Ranges - Underwriting a single "base case" is just guessing. True risk management means modeling explicit low to high ranges for future rent growth, cap rate expansion, and lease-up times to see exactly where the net operating income (NOI) breaks.
If you find a 1% deal today, it usually means you’re taking on hidden operational or macroeconomic risk. If your underwriting doesn’t explicitly stress-test for those specific points of friction, you're just hoping the market bails you out.
0 Reply
Nick Robinson
Rental Property Investor · Murrieta, CA · Member since 2020 · 338 posts · 344 votes
4mo
@Cayden Campbell
100% everyone is focused on speculation and appreciation over cash flow. When I first invested in PHX, it was great, close to SoCal, better cash flow than CA, more landlord-friendly laws, and solid appreciation. Now, any properties I see from AZ don't pencil out and make no sense for me, so I started looking into other markets with strong cash flow. The further I go in my REI journey, the less I want to max out leverage. I'm putting 40% down in stable, cash-flowing markets with lower volatility. I'm even thinking that when prices recover in PHX, probably in a couple of years after the new supply is absorbed, I'll sell and move all my assets there. By the numbers, that could get me much closer to my goal of passive income covering twice my expenses, which is why I started investing in the first place: to be financially free, spend time with family, and enjoy life.
0 Reply
Garrett CrosbyPro Member
Real Estate Agent · Los Angeles, United States · Member since 2021 · 392 posts · 162 votes
4mo
The 1% rule has essentially never applied in LA, so investing here has always forced you to do real underwriting. In some ways that's been good — LA investors tend to be comfortable with appreciation plays and understand that the buy thesis isn't always about immediate cash flow.
But what I've seen shift nationally is that a lot of investors who were making appreciation-driven assumptions in markets that used to cash flow now find themselves in the same position LA investors have always been in — except without the depth of market, the rent growth history, or the long-term track record that makes that risk defensible. That's where people are getting hurt.
The 1% rule as a universal standard was always a shortcut that didn't travel well. What actually matters is whether your deal survives a stress test at current rates with real expenses — vacancy, capex, insurance, management — not whether it hits a ratio. If it does that, you invest. If not, you know why you're buying and have a clear exit strategy.
[email protected]
0 Reply
G. Brian DavisPro Member
Investor · Hatboro, PA · Member since 2016 · 3k+ posts · 880 votes
4mo
I think that's one of the reasons the 1% rule has survived for so long despite everyone declaring it dead every few years.

What I've always liked about it is that it's simple. Not because it tells you whether to buy a property, but because it helps you decide whether it's worth spending another 30 minutes analyzing. I've seen deals that didn't come close to the 1% rule turn out great, and I've seen deals that exceeded it turn into headaches. Taxes, insurance, financing, maintenance, HOA fees, and local market conditions matter too much for any single rule to tell the whole story.

To me, the bigger lesson is exactly what you said: know your market. Investors who have spent years buying in the same area usually develop their own version of the "rule" pretty quickly.
1 Reply
Garrett CrosbyPro Member
Real Estate Agent · Los Angeles, United States · Member since 2021 · 392 posts · 162 votes
4mo
I operate in two very different markets and this question plays out differently in each one.
In LA/SoCal where I'm an agent, the 1% rule is basically a fantasy. You're looking at $700k-$1M+ properties renting for $3,500-$4,500/month. The math doesn't work on cash flow and everyone knows it. Investors here are betting on appreciation, supply constraints, and long-term rent growth — and historically that's been a valid thesis. But it's not a cash flow play.
In Fayetteville, NC where I have my buy-and-hold rentals, the math is completely different. I'm pulling $400-$550/month in cash flow on properties I bought for $105k-$157k back in 2021-22. Those deals cleared 1% comfortably. But even out there, anything I'd look at buying today is harder to underwrite at current rates.
The honest answer is the 1% rule isn't dead universally — it's just geographically specific and market-cycle specific. In most coastal and high-demand markets it was never realistic for cash flow investors. In secondary and Midwest markets you can still find it if you're willing to dig.
What I'd push back on slightly: stop treating it as the end of the analysis. Even when I hit 1%, I still stress test at 10-15% vacancy, factor realistic capex, and make sure the deal works if rates stay elevated and I have to refi later. The rule got people in trouble when they used it as a reason to stop thinking instead of a reason to start.
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