50% strategy on 100k vs 200k

[Joshua Norwood]

Im very curious to know if anyone has any insight on this. Would you use the same 50% rule on a house that you buy for 100k that rents for $1000 vs a house that you buy for 200k that rents for $1500? Wouldn't the expenses be relatively similar? Would you really need to save the same amount for all the expenses you have?

[Andrew Postell]

@Joshua Norwood I am not familiar with the 50% rule...but as the post above mentioned your expense RATIO is usually higher on lower valued homes than it is on higher valued properties because of the exact reason mentioned.  I have invested in both lower valued homes and "mid-level" valued homes.  There's a sweet spot in there where my renters have reasonable credit, jobs, are used to responsibility, etc. at the mid-level property.  In my market that is $200,000 value or lower.  Now, I am not BUYING those houses for $200,000 but that's the value limit I set.  Lower valued homes do rent at a higher percentage and I do feel that you cash flow better even with expenses but I do pretty well at the $200k and lower.  This is something that you might have a better feel for after investing for a while.  Maybe your sweet-spot is $100k because of this reason or that reason.  Who knows.  But I would recommend NOT going to far away from the 1% rule....meaning the cost of your purchase + rehab + holding costs, should = about 1% of net rent income.  So if you spend $150k, then $1500 = 1% of acquisition cost.  if it's higher %, that's good too.  Lower, not so good in the beginning.  Just my recommendation. I hope all of that made sense.  Thanks!