1% and 50% Rules - CF Breakeven

[David Gelinas]

Hi - newbie here trying to understand how some of the shorthand rules apply in a SFH BRRR and can't quite make sense of them. Let's use a basic example:

Cash Purchase a home for $70,000 + $10,000 Rehab and ARV is $115,000.

Investment Refinance LTV: 70% (it's my understanding that when you refinance most banks won't lend above 70%)

Annual Rate: 5.5% (seems reasonable for a refinance investment loan)?

Monthly P&I Payment: $617

So you get all your cash out at the higher ARV, but the cash flow doesn't seem to work...

1% rule would say $1,150 Gross Rent per month

50% rule would say $575 left over for P&I...which is less than $617

Where am I going wrong here? Does the 1% and 50% assume a higher LTV or lower interest rate environment? What am I missing?