Your favorite state to buy in that meets the 1% rule or better?

[Julene Webb]

For our next purchase we are looking out of state for better returns.

What city/state is your favorite today?

[Mike D'Arrigo]

@Julene Webb I might be in the minority here but I don't put a lot of stock in the 1% rule. It's a top line metric that is not a measure of cash flow or ROI in any way, It's especially faulty if you are comparing different state. A 1% ratio in any of the TX markets for instance, will not product the same kind of return in say Kansas City or many other markets. The reason is that TX has much higher property taxes and insurance rates which aren't taken in to consideration through the 1% rule. It can also be misleading within a market. In some markets such as Kansas City and Indianapolis, there can be some real inconsistencies in assessed values and therefore property taxes. I've seen properties with lower rent ratios have better COC returns because the taxes were lower even in the same market and same class of property. I would never rule out a market or a particular property on the basis of rent ratios without diving in to the numbers more. Those taxes and insurance rates can make a much bigger difference on the bottom line than a small difference in rent ratios. I had an investor who didn't want to consider a property because it had a .9% ratio and insisted on a 1%, however that property with the .9% had and amazing return because the taxes were very low so don't over rely on the 1%.