1% Rule Based on ARV or Acquisition Cost

[Blake Wight]

Hey Guys!

I had a quick Inquiry about the 1% rule general rule of thumb. In terms of BRRRR it is common to purchase many distressed properties that need to be rehabbed. My question here for a preliminary quick test for cash flow is in regards to whether we base the 1% rule off of the Acquisition cost of the asset (Purchase price, closing cost, rehab, etc.) or the ARV.

[Luka Milicevic]

Base it on your "all in" cost

Not ARV, but your actual cost

Remember, the 1% rule is just a rule. The property doesn't have to meet this rule for it to make sense for you, or it can exceed this rule and still not make sense. 

Run all the numbers, and don't just follow this rule blindly.