It has been a long time since I have bought or sold.

Is the 1% rule still a good guideline? The 1% rule is that the monthly rent is 1% of the purchase price .

So, a $150k house should rent for $1500/month.

It really doesn't apply any longer.

Why did it work to begin with?

1% per month meant you were getting 12% per year. Doing some quick math, if 1/3 of your income goes to fixed expenses an investor could expect a solid 8% return on the investment. Then the government decided to dilute dollar. You heard terms like market correction and people were trained to think bubble bursting. Bubbles didn't break, but returns did get watered down. Now a .08% means you will net out about 6.4% rate instead of 8%.

The flip side to this though, for those who waited for that bubble to burst, the market has gone up a solid 56% nationally since C-19. Cash on cash returns if you used a small amount of leverage are off the charts.

Your market is local. What works in one area might not work in your area. The biggest questions is - does it cash flow?

I was buying 3 bed / 2 bath ranches from the 1960s for $140K and renting them for $1200 a month. I could get those to cashflow with a mortgage at 4%.

Those same houses are going for $240K, renting for $1550 a month, with a mortgage at 6.5%. They don't really cash flow anymore if you are buying.

So if SFH are not working, try something else. Airbnb / short term / mid term rentals.

Storage units?

Multifamily? With multifamily the purchase price and the loan are usually based on the income the property generates. If you can show the bank that the rents are low and you can increase the cash flow then you might get something that works.

Mobile home park?

Timber land?

I am sure Ray has some more ideas.

MMIT,

I used to use 2%!

Each home should stand on it's own and provide real profit.

What are YOUR goals? Cash flow? tax shelter? Put cash to work? Protect your prop by acquiring the one next door? Rent to your aging parents?

I have shifted my thinking and buying analysis. I now consider the EASE of renting and maintaining - such as a nice brick home in a nice neighborhood with new windows and HVAC

There is more to managing for a profit than plain old rent.

Terms and loans, seller financing, Subject to, buy with cash, Mid Term Rentals, furnished rentals, shared housing...

I ENCOUARGE pets and charge for the appliances, including washer/dryers. Lots of ways to increase the income.

Get to Convention and learn more ways to make money in RE.

BRAD

Bill, it has been a long long time since I heard anyone refer to Gross Rent Multipliers. GRMs are good in areas with lots of comps that allow you compare quality within specific zones and between different zones.

In San Diego, the area just before TJ Mexico is called Imperial Beach (IB). It was an underdeveloped area of ocean front property. It would occasionally have ocean water quality issues associated with raw sewage coming from Mexico, so it was a not quite ready for prime-time ocean front town.

The Gross rent multiplier for IB back in the day could have been figured out by using $1,200.000 sales price divided by 120,000 annual gross income. So, the GRM would be a 10 in that example. That 10 might compare to an 8 on inland coastal area, a 6 in the mountains or a 3 in the desert - all within a hours drive from one another.

Why don't GRMs give you a solid picture of how a place should be priced? That beach front house with GRM of 10, doesn't factor in that regular insurance 70% there, or that it is on a flood zone now so flood insurance is required by your lender. Expenses vary wildly.

PS

70% of our new leases CHOOSE Weekly/Bi-weekly Payday Plan Rent. With that I make 13.4 months of rent each year.

Plain old renting is tough with today's housing prices. Gotta get creative by solving people's needs in exchange for money.

GRM is still widely used here but we do have a significant numbers of properties either that have sold and/or for sale in most areas. As it is a comparative figure it only makes sense in that way.

Cashflow is king for me as well.

Still looking for a couple more places and still trying to get in the niche markets.

All we care about is good cash flow and lack of stress. Will it rent easily or will I be chasing unicorns at every turnover?

All we care about is good cash flow and lack of stress. Will it rent easily or will I be chasing unicorns at every turnover?

Selling fast if need be is another reason I have been letting some of my lower quality places go.

I like rules of thumb. Just realize...that's what they are. They get me in the ballpark.

Rules of thumb I use:

Newer...nice...easy to manage...no hassle- I need 1%/mo.

Average...working class home...older...prolly some tenant hassle... I need 1.5%/mo.

Super low end...hard to rent...rough area...rough tenants... I want 2%/mo.

Again...it just gets me in the ballpark.

If a deal makes sense...it makes sense.