Using The 1% Rule for Real Estate Investments? Not So Fast



Does it make sense to use the 1% rule for real estate investments? For many real estate investors, the answer would be a hard “yes”, but Dave is here to show why that may not be true.

The one percent rule has been regarded as a hard-and-fast rule for a while in the real estate investing community. Many investors will solely use the rent-to-price ratio to see whether or not a deal is worth pursuing. But, that may cause a handful of problems, specifically since it doesn’t factor in things like expenses, appreciation, or time needed to take care of a property.

Dave has found data that argues properties with RTP ratios of at least .5% should be considered when looking at deals, yet this is HALF of the trusted 1% rule.

Do you use the 1% rule when analyzing deals or do you factor in other metrics like appreciation? Let us know in the comments!

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How to Use Price-to-Rent Ratio to Analyze a Location:

How to Use Price-to-Rent Ratio to Analyze a Location


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The Best Cash-Flowing Real Estate Market in Each State

The Best Cash-Flowing Real Estate Market in Each State


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Connect with Dave on BiggerPockets:
https://www.biggerpockets.com/users/DaveM2

00:00 The 1% Rule
00:27 What is it?
01:41 RTP (Rent-to-Price Ratio)
03:15 Why The 1% Rule is Outdated
04:32 The 1% Rule ≠ Profitable Cashflow
06:27 Cashflow ISN’T That Important

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