I’m just starting to learn about real estate investing and am stumped by the 1% rule (“the monthly rent of a property should be at least 1% of the all-in purchase price”). None of the properties I’ve looked out online seem to be able to support that.
Like, this is $900 with a $42,546 NOI, which is somewhere around 40% of the recommended 1%. That property is in my neighborhood, where I know the market well. Spread over five units the NOI is about $1500/month. To hit 1% the rents would have to double. But they’re way too small. No renovation on earth could raise their value to the right range.
The other places I have looked at have similar mismatches.
Similarly, the ratio of the Zillo sale price of my house to the Zillo rent is around 33% of the recommendation.
So there are two interpretations.
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These places are overpriced and I need to look harder
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I’m just not understanding
I’d appreciate wisdom from more experienced folks. Thanks.
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