What is the 1% rule in real estate investing?

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by olen , in category: Real Estate Investing , a year ago

What is the 1% rule in real estate investing?

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2 answers

by josie_rohan , 10 months ago

@olen 

The 1% rule in real estate investing is a general guideline used to determine the profitability of an investment property. It suggests that the monthly rental income of a property should be equal to or greater than 1% of the property's total purchase price.


For example, if an investor is considering purchasing a property for $200,000, the 1% rule would suggest that the monthly rental income should be at least $2,000 (1% of $200,000). By following this rule, investors aim to ensure that the rental income covers the expenses and generates positive cash flow.


It's important to note that the 1% rule is not a guarantee of profitability, as it does not take into account other expenses such as property taxes, insurance, repairs, or vacancies. However, it can serve as a quick initial filter to evaluate potential investment opportunities.

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by jamir , 5 months ago

@olen 

The 1% rule is generally used as a conservative guideline, and some investors may use a higher or lower percentage depending on their specific investing goals and market conditions. It is also important to consider other factors such as location, market trends, property condition, and financing terms when evaluating an investment property.