All Forum Posts by: Joe Villeneuve

@Joe Villeneuve

I am buying to demo in a year.

 Ah, finally got you. :)

1. The 1% rule and the 35% operational expense rule serve as benchmarks to quickly evaluate the potential profitability of a real estate investment. While they are indeed somewhat arbitrary, they provide a straightforward framework to filter out properties that are unlikely to meet my investment criteria.

• 1% Rule: This rule helps ensure that the property generates sufficient rental income relative to its purchase price. If a property meets the 1% rule, it typically indicates that it can cover its mortgage and other expenses while still providing positive cash flow.
• 35% Operational Expenses: This rule helps estimate the proportion of rental income that will be consumed by operating expenses, excluding the mortgage. By keeping operational expenses around 35%, I aim to ensure that the property remains profitable even after accounting for maintenance, CapEx, property taxes, and vacancies.

2. These rules are not the be-all and end-all, but they serve as useful guidelines to streamline the initial evaluation process. Here's how they impact my REI situation:

• Quick Evaluation: They provide a quick way to assess whether a property is worth further consideration. If a property fails these benchmarks, it’s likely not worth the time to perform a deeper analysis.
• Risk Management: By adhering to these rules, I aim to minimize the risk of overpaying for properties or underestimating operational costs. This is particularly important as I prefer to self-manage properties, and accurate cost estimations are crucial for maintaining profitability.
• Scalability: These rules help in maintaining a consistent evaluation metric across multiple properties and markets, aiding in scaling my portfolio systematically.

That said, I understand that each investment should be evaluated on its own merits and that these rules may not capture the full picture. I am open to exploring other metrics and strategies that might offer better insights into profitability and ROI.

I’m curious to know what metrics or strategies you and others have found to be effective in evaluating and maximizing real estate investments. Any shared experiences or additional tips would be highly appreciated!

Thank you again for your questions and looking forward to more insights.

OK - 

1. I'm not. Feel free to add more or suggest different ones. Your opinion will be welcome.

2. I'm only seeing one rule (safety). The safety rule is a personal preference. I prefer to avoid D/F neighborhoods. Not sure about the second rule you mentioned.

@Joe Villeneuve

1. These rules are not to be used in order to measure a successful deal, but rather finding a suitable deal in the first place. The deal would have to be in a safe location and the operating activity in the business itself could be self-serviced.

2. I'm interested to hear about any REI strategy, with properties located in safe neighborhoods, that yields better than the 1% rule minus operating expenses. I'm open to anything and have only stated that I can be proactively involved in the business to reduce operational expenses.

Buying some properties for an Airbnb kind of business can be one example of such, as long as one knows from experience that it yields better than the standard 1%.

Hello all,

I'm seeking advice on achieving a higher ROI in real estate investments beyond the 1% rule and maintaining around 35% of monthly operational expenses (including Cap-ex, maintenance, property tax, and vacancy).

To the best of my knowledge and abilities, the 1% rule with 35% operational expenses seems to be the best I can achieve today. However, considering gross monthly income and operational expenses, I'm looking for strategies or types of properties that can provide a better net ROI.

Here are some key points:

• Location: At least a C neighborhood that is safe for driving around at all hours.
• Cashflow: Investments that can deliver superior cash flow.
• Involvement: I have the time and willingness to handle maintenance and operational activities myself. This includes property management, purchasing houses, etc. For example, if someone suggests Short-Term Rentals (STR) or Mid-Term Rentals (MTR), I can manage them personally since I have the time.

I'm open to various strategies, including single-family homes, multi-family properties, or niche markets, as long as they fit the above criteria.

What types of properties or markets have you found to offer the best cashflow and ROI? Are there any particular strategies or tips you can share to maximize returns while keeping operational expenses manageable?

Your insights and shared experiences would be greatly appreciated, and I'd love to expand our conversation privately.

Thank you