1% rule possible in this high market?

Question

The 1% rule; the monthly rent should be equivalent to 1% or higher of the purchase price of a property.

My question is this; is the 1% rule possible in this high market? I find that with 20% down I can get a property to cash flow but still fall shy of the 1% rule.

Any thoughts or advice is appreciated!

Tim

Timothy Carey · Answer

Love the responses! I have done alright so far with a couple properties not netting the 1% rule but wasn’t sure if I was overlooking future expenses or something else I could have been missing. Thank you!

Sean Martin · Answer

Yes. Just closed on a deal that meets the 1%.

Carlos H DeOliveira · Answer

@Timothy Carey

You can cashflow with a rent to value below 1%, also keep in mind that 1% is just a general rule it doesn't take property taxes, HOA fees, insurane and etc into account, every market is different

Just make sure that on your proforma, you are comfortable with the vacancy estimates, cap ex estimates, repair estimates and after all that if you are still cashflowing even though you are not at 1%. Who cares?

Joe Villeneuve · Answer

Who cares?  The bottom line isn't passing some ridiculous 1% rule, it's the cash flow.  I'm amazed how many times I read on here that an investor questions if a deal is a good one if it doesn't pass the 1% rule...even if it cash flows.

Now, unless your goal is to pass the 1% rule as your number 1 priority, with the cash flow a bonus, then by all means focus on that arbitrary 1% rule and to "h377" with the cash flow.