Is the 1% rule dead in Arizona?
Investor · AZ · Member since 2024 · 25 posts · 8 votes
Is the 1% rule dead in Arizona?
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Rock Star Extraordinaire · Northeast, TN · Member since 2015 · 10k+ posts · 17k+ votes
1yQuote from @Ken M.:
Quote from @JD Martin:
The 1% "rule" is just about dead everywhere outside of the midwest and some places in the south that are still relatively cheap. Price to rent ratios have skyrocketed everywhere and it's pretty unlikely rent will ever get to a point where it evens back out because at those levels it's just as cheap/cheaper to buy (not to mention most renters can't afford anything like that).
Well, of course - that's obvious - but most people in most places in the US are going to spend too much on their purchase because that's what's available. Years ago I bought houses for $25k in my market. Pretty easy to make 2% or more when you're spending that kind of money. These days I can't buy a lot for $40-50k. Any house here that's sub $100k, on or off market, is going to be so bad it will need $30-75k in rehab. Here once you start passing $1500 in rent your pool is getting pretty shallow. I'm sure I could go to some midwest markets or even some more depressed markets in my region and get better pricing, but that's out of my wheelhouse at this point in my life as I have no desire to learn new markets when I'm closer to the end than the beginning.
Skyline Properties
35 Replies
- Real Estate Broker · Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH · Member since 2013 · 31k+ posts · 20k+ votes1y
Quote from @Jimmy Lieu:
Quote from @James Wise:
Quote from @Jimmy Lieu:
Quote from @Anthony Sigala:
We are all aware of the 1% rule--the gross rent produced by a property must equal 1% of the of the property's acquisition cost. The question being, does this still hold true for Arizona? If not, what metric do you guys use?
Yes, unfortunately it is dead in a lot of states, but not Columbus Ohio! You can still find deals that are priced from $120-180k that do positive cash flow and hit the 1% rule. Plus, you get amazing appreciation potential due to how much population growth, job growth, and companies moving and developing here. I would characterize Columbus as some positive cash flow but amazing appreciation potential. I would suggest looking in Columbus Ohio for so many reasons - population growth, job growth, and companies moving here. You can find positive cash flow and the 1% rule here! Happy to connect and answer any questions you may have!
But Columbus is awesome! In a lot of states, you can't find the 1% rule or any positive cash flow. My client recently purchased a 3/2 single family house for $160k that was near turnkey and already rented at $1900/month and in a very desirable residential neighborhood! I can't find a lot of other cities where you can find deals with positive cash flow and amazing appreciation potential.
Plus Anduril just announced another 4k jobs and over 1B in development in Columbus Ohio. That's with Intel, Honda, Amazon, FB, Google, etc. that are already developing here!
- Investor · AZ · Member since 2024 · 25 posts · 8 votes1y
I can find properties that hit the 1% rule in some small communities, but they are having declines in population. This concerns me about the potential to maintain a solid tenant base and would likely cause a higher vacancy factor.
- Member since 2018 · 37 posts · 11 votes1y
Sorry, this is not about Arizona, but my peraonal experience.
I only have a couple sfh rentals, but making almost double the 1% in rent. One is in Nashville, purchased in 2017, and one in small town in a coal area, PA, purchased in 2022. I have another property that’s not cash-flowing yet, also in PA, but all my properties I bought at a great price. I think that’s why I don’t have more properties, because it has to be a great deal right from the get-go, and that usually means it needs a bit of work and is also dated, but a solid investment. I have great tenants, because I refuse to buy a property I wouldn’t be willing to live in myself. I could mke lot more money being a slumlord, and would have to work ten times as hard. It’s not easy finding the right deal, and takes quite a bit of time. It’s not the way for most people, but it works for me.
- Real Estate Agent · AZ · Member since 2024 · 2 posts · 1 vote1y
Hi Anthony,
I do believe that it is achievable here in Arizona, but these deals will be off-market and will need some work. With that being said, if you have patience and good connections for off-market deals, you will definitely come across them. I work for an investment brokerage here in the greater Phoenix area, and we currently have one of these opportunities available. This has been the first true 1% rule home that we have seen in awhile, and it is priced so well due to the condition of the property. With the current market conditions, I can definitely see more of these type properties becoming available in the future.
- Lender · Phoenix, AZ · Member since 2024 · 32 posts · 17 votes1y
Quote from @Anthony Sigala:
We are all aware of the 1% rule--the gross rent produced by a property must equal 1% of the of the property's acquisition cost. The question being, does this still hold true for Arizona? If not, what metric do you guys use?
I'm selling a 3 unit in Phoenix right now that fits the 1% rule, hard to find in Arizona no doubt but we come across some.
- 1yJoey BanasihanPro MemberInvestor · Boise, ID · Member since 2019 · 238 posts · 189 votes
Hey @Anthony Sigala many folks might be optimistic about this rule but the "rule" was created during a very specific and particular time in real estate as a way to help newer investors have a framework on how to approach rental properties without going in blind. We've been helping investors from Bigger Pockets buy in Boise where that rule does not necessarily work - that's because we try to educate them that its more important to take action on an pretty good investment property than waiting around for a "home-run" deal. Whichever direction you go, be sure to work with folks who understand this and gives you the confidence to take reasonable action - I'd personally take an okay investment and weather the storm for a few years that will eventually perform well, and do that each year - rather than take 3 years to wait for the best deal possible. Good luck with your endevours, reach out if you want to learn more about the coolest market here in Boise haha.
Quote from @Thomas McPherson:
Of course it isn't fully "dead" but it is real hard to find and only possible off market. Properties in Tucson are closer to that 1% rule mark or even other smaller cities but then there is more risk. Analyzing an investment with the Cash on Cash return makes more sense to me.Quote from @Anthony Sigala:
We are all aware of the 1% rule--the gross rent produced by a property must equal 1% of the of the property's acquisition cost. The question being, does this still hold true for Arizona? If not, what metric do you guys use?
- I got .93 from the MLS in Tucson in 2024 - but you also need to consider the longer vacancy vs. a higher grade property.
Quote from @Thomas McPherson:
Of course it isn't fully "dead" but it is real hard to find and only possible off market. Properties in Tucson are closer to that 1% rule mark or even other smaller cities but then there is more risk. Analyzing an investment with the Cash on Cash return makes more sense to me.Quote from @Anthony Sigala:
We are all aware of the 1% rule--the gross rent produced by a property must equal 1% of the of the property's acquisition cost. The question being, does this still hold true for Arizona? If not, what metric do you guys use?
- Real Estate Agent · Boise, ID · Member since 2017 · 31 posts · 18 votes1yI have a listing in Caldwell, ID right now that meets the 1% rule.
Quote from @Anthony Sigala:
We are all aware of the 1% rule--the gross rent produced by a property must equal 1% of the of the property's acquisition cost. The question being, does this still hold true for Arizona? If not, what metric do you guys use?
As well as a listing that gets .73 w/ potential to get up to 1% in Boise, ID.
And a .81 in Nampa, ID.
Hit me up for details on these properties.
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