Are you finding the 1% rule or positive cash flow? Is the 1% rule dead now?

[Jimmy Lieu]

I feel like I've heard A LOT of investors recently say the 1% rule and finding positive cash flow is dead...

However, I did a deep dive in my own local real estate market (Columbus Ohio) and found quite a few real estate deals that hit the 1% rule. These were ALL real deals closed with clients in the last few months!

Property A:

Turnkey renovated 3/1 single family house
Purchase price - $160k
Rehab needed - None
Market rent - $1600-1700/month

Property B:
Duplex with 2/1 on each side (one side occupied/one side vacant)
Purchase price - $227k
Rehab needed - $10k
Market rent - One side rents at $1250/month and other side should be able to get the same. Total rents should be $2500/month

Property C:
3/1 single family house
Purchase price - $120k
Rehab needed - $5k
Market rent - Rented at $1550/month with section 8 (CMHA)

So to answer the age old question... is it still possible to find the 1% rule, YES, it is 100% possible! Is it harder now due to the high interest rates and competitive real estate environment, yes! But it is still possible.

If you live in an expensive real estate market (for example California, Oregon, Washington, New York, New Jersey, etc..) and can't find the 1% rule, have you ever considered investing out of state? What's stopping you?

[Clayton Silva]

In my opinion, the 1% rule was never alive.  It is a really bad metric for determining the value of the investment.  It was always meant to just be a quick rule of thumb to see if the investment was worth digging into further, but was never intended to be the golden rule by which one should invest.  So many investors I see make this mistake and it costs them dearly down the road.  

Why the 1% rule is meaningless:

It does not tell you anything about the property itself, is the property in good condition or does it need significant repairs?  Is the neighborhood, town, submarket, and market appreciating or depreciating?  Is the rental market stagnant or growing?  Who are the tenants?  What do they do for work and what industries is the town dependent on?  What are the tax benefits if any in the area is it in an opportunity zone or anything like that?  What is the highest and best use of the property?  Is cashflow even the correct goal for you and your investing strategy based on your income, tax liability, and other factors?  

The 1% rule, in my opinion, made a lot of lazy investors who were unwilling to do the work to actually learn about what they were investing in and it cost them a lot.  I know there are a lot of people that will disagree with me, so I would implore them to answer any of the questions above based on the 1% rule.  

There is no single rule, no magic get rich quick option, no easy path in real estate investing and a lot of people are learning that the hard way in the current environment.

Just my 10 cents.