The 1% Real Estate Rule

When it comes to real estate investing, the 1% rule is a commonly referenced guideline to help investors evaluate potential properties. The rule suggests that a good real estate investment is when the monthly rent income is at least 1% of the purchase price of the property. For instance, if a house costs $200,000, it should ideally produce a monthly rental income of $2,000 to meet the 1% rule.

It’s important to note that the 1% rule is just a rule of thumb and shouldn’t be the sole factor in determining an investment’s viability. Location, property condition, potential for appreciation, and other expenses need to be considered as well.

Of course in today’s market with high property prices, it can be challenging to find properties that meet the 1% rule, especially in certain states. However, it can still serve as a starting point to help investors quickly screen potential investment opportunities and gauge their potential returns.

-GC