Any tips for analyzing properties. (1% & 50% rules)

[Evan Rumble]

As I am moving towards my first investment, I am currently trying to analyze as many properties as possible. assuming the property doesn't have any obvious red flags, I normally start with a quick check for the 1% rule and 50% rule, as cash flow is really what I am looking for in my investment. If it passes those, I will run a report on BP to further analyze.

1) Should I live and die by the 1%, in terms of deciding whether I should dive into deeper analysis on the property? If something is at 0.9% should I completely rule it out from having any cash flow potential? 

2) These rules seem very dependent on semi-accurate numbers (estimated rent; asking price - which is then dependent on things like estimated repair costs; etc.) Therefore, there are probably deals that could have been great, but I underestimated the rent / didn't consider negotiating a lower price (making the property fail the 1% rule). Is there any advice for improving my accuracy at predicting these important numbers? accurate rent estimation is one of my biggest issues/concerns. 

3) another set number I have a hard time estimating is expenses. Are there percentages I could use to estimate individual expenses, for when I want to get more precise than assuming 50% of rent will be expenses. (insurance, cap ex,  etc.) Obviously, property tax will be dependent on my location (east of Akron, OH), but will any of the other individual expenses be highly area dependent?

4) Lastly, is there anything else I should be adding into my initial analysis; before I visit the property, talk to contractors, etc? As of now, I first make sure there are no big red flags like the neighborhood, school districts, too much repair needed, etc; then I look for the 1% or 2% rule; the 50% rule; try to estimate repair costs/ARV (which is hard for me).

I would greatly apricate any feedback, and I apologize if any of this was hard to understand.

[William Sing]

1) You should not live or die by the 1% rule. I see this a lot with new investors who are trying to get a home run on their first deal. Yes, it would be nice but it keeps you from even getting in the game. The 1% rule doesn't apply to all markets and can range depending on the market. If you start analyzing a lot of deals you will get a sense of where that rule might actually be for your market. 

2) Analyzing the deal is only part of the equation. You might be off by a bit but making sure it still cashflows is more of the key. You are trying to stay in the game long-term. Besides analyzing a lot of deals and talking with local investors on how they calculate those numbers and talking to property managers in the area it is hard to tell. I see new investors sometimes being way too conservative. Having a good reserve can hedge the risk to offset some of the risks as well. 

3) 50% rule is semi-helpful but not is a blunt instrument. I'd talk to other local investors to see if you can get a range from them. Insurance is usually pretty stable whereas capex/maintenance can be wildly different from property to property.

4) I think you are doing all of the usual things to make it work. In terms of the ARV just know that with the recession coming that property values might take a dip in your market. You can talk to a real estate agent or others in the real estate investing company. Might be a bit harder to get a real estate agent to do the ARV comps unless you are working with them to buy.

Hope this helps!