Is the 1% or even 2% Rule Applicable in Australia

[Finn Irving-Dent]

Hi 

I have recently started looking at investing in property in Australia and within NSW more specifically. The 1% rule where the total monthly rent is equal to 1% of the property purchase value has come up frequently as a useful way to quickly analyse if a property is a sensible investment that may cash flow. As I have been looking into buying my first investment property I have found many properties that satisfy the 50% rule where 50% of the total rent income is used to cover all costs excluding the mortgage and what's left is potentially positive cash flow. However I have not come across a single property to satisfy the 1% rule or even come close to 2%.

It may be that I just need to look deeper into the real estate market in New South Wales, or look elsewhere in Australia or maybe this figure of 1% is unrealistic in Australia and not so relevant?

This is my first post here so apologies if it is inappropriate.

Br, Finn

[Jason D.]

@Finn Irving-Dent keep in mind that, even if a property meets the 1% rule, that doesn't necessarily mean that it cash flows.

What you need to do, is analyze properties that cashflow, and see what their ratio is. What you may find is that it takes 1.5% rent to purchase to cashflow, or .75%. Once you know what your magic number is, you can use the "whatever %" rule to quickly evaluate properties.