The One Percent Rule
The one percent rule isn’t some complicated formula you need an abacus to figure out. It just means that what you charge for rent each month should be equal to (or greater than) 1% of what you paid for the house.
A $75,000 house should rent for a minimum of $750 per month
A $150,000 house should rent for a minimum of $1,500 per month
A $200,000 house should rent for a minimum of $2,000 per month
Be sure to note that when we say the rental price should be 1% of what you paid for the house, that number should include the cost of any renovations, repairs, or improvements.
If you buy a house for $100,000 and put in another $100,000 to renovate it, it doesn’t make sense to rent if for $1,000. You would need to rent it for at least $2,000 per month.
The one percent rule is just one of the measures you can use in the early stages of evaluating rental properties. Of course there are many factors like hoa fee’s, old A/C, bad neighborhoods, roof, and even if its a condo, duplex, or four plex. Now many of you that live in California or New York are laughing because its impossible to do so. This is rule is used for cash flow, not appreciation. When buying in a market strictly for appreciation not concerned about the monthly cash flow, that’s when you can get into a lot of trouble. Use this rule to scan through properties before even putting that property on the top 3 list, and if you’re having trouble finding rental rates, watch my video here on rental rates in any market.
Give me a call at 480-466-4917 if you have any questions
