I’m a first time buyer and wondering if the 1% rule is a good number just for starting out.

My current private seller is offering $190k for a newly renovated home, all new appliances, heat pump, wiring, plumbing, and it has an ensuite in the basement but we have yet to negotiate that number further.

The top unit pulls $1100 a month but she says it could be pushed to $1500 a month because it’s a 3 bedroom.

Bottom unit pulls $600 and is basically a studio. Top unit pays heat and electricity and the bottom unit simply just pays rent since it’s so small it’s hard to split the expenses.

Wondering what numbers fellow investors look for. What would you guys ask or negotiate with this particular deal? Thank you

@Josh Garden  Depending on the market you can use the 1% rule as a sniff test before drilling in to calculate real numbers and run comparable with the market. In terms of what offer you should put in you can use a combination of the cap rate for this property plus what recently sold properties in the area are going for. If you are working a investor savy realtor in your area they may be able to help you in addition with coming up with contingencies, etc. for the offer.

Also, check to see if the "bottom" studio unit is legal because that would impact what you can do with the rents (single family vs 2 family).

Good luck!

@Lamont Chen Hey Lamont, what do you mean by legal? What would make it illegal?

Thanks

@Josh Garden The county tax site should have on file whether or not the home you are trying to purchase is 1-4 family. There are certain single family homes with 2 kitchens whom people rent out separately as individual units which may not be legal (should check with an attorney). Sometimes 2 family homes do not have separate utilities either so that home could in fact be 2 family but just one more thing to double check to be sure. 

Issue may not be immediately apparent but if you need to evict one or the other tenant... it could pose some issues.