EP186: The 1% Rule for Real Estate Investing
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There are many ways to evaluate a real estate deal, but one common method utilized by investors is the 1% Rule. This rule of thumb helps investors determine if their investment will be safe and profitable.
On today’s show, I’m discussing everything you need to know about the 1% Rule. I’ll give a straightforward definition, and share concrete examples. I’ll discuss my experience with this idea, and how you can use it in your real estate business!
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In real estate investing, the 1% Rule helps investors determine if a rental property will produce cash flow. Basically, when you purchase a piece of real estate, it should cash flow up to 1% of the purchase price every single month.
To use round numbers, let’s say you purchased a real estate investment for $100k. Following the 1% Rule, that property would need to produce $1000 in rental income every month. This is a simple tactic used to ensure that your expenses will be covered.
Personally, I like to go higher than 1%. My main focus in real estate is cash flow. However, 1% works for many investors that I know. It’s important to remember that the 1% rule is simply a jumping off point; it is not the end all, be all!
If you’re analyzing a property, you’ll want to be more thorough than just evaluating the 1% Rule. You’ll also want to take a good look at all the numbers involved, including ROI and cash flow. On today’s show, I’ll share more about the 1% Rule, including accounting for expenses and using 1% as a buffer. Don’t miss episode 186 of Investing in Real Estate!
If you’re ready to begin building a passive income through rental real estate, book a FREE call with our team today. We’re ready to talk about your goals and want to help you learn more about earning legacy wealth for you and your family.
On this episode you’ll learn:
- Under what circumstances would it be more appropriate to bump the 1% Rule to 2%?
- Why are previous residences typically bad investments?
- What expenses should you account for in your investment property?
- How can you use the 1% Rule on a basic level?
- And much more!