A couple of rookie questions

[Kevin Jennings]

Hello everyone. I am just starting to dive into real estate investing and still have a lot to learn before I either buy my first rental property or move and rent my current home. There is one thing that confuses me that I just can’t seem to find an answer on anywhere, at that is the importance of the 1% rule.

When looking on Zillow, every house I find, the rental estimate is less than 1% of home value. I also looked on roofstock, and with all the information that they put in for rental and expense estimates, etc, they all show negative cash flow. Even in my current house/neighborhood, I couldn’t imagine people being willing to pay 1% of what homes are currently selling for. Am I just out of touch with what people are willing to pay in rent, or is there something else I am missing?

I know you can factor depreciation into taxes, but am I correct in thinking that shouldn’t be factored into cash flow calculations?

Hope these questions don’t sound too dumb. Just trying to make sense of things as I continue to read and learn. Thanks in advance for the help. 

[Kevin Hart]

@Kevin Jennings Its hard to find deals that meet the 1% rule on market, even in my market of Louisville, KY which tends to be pretty affordable. Have you considered the BRRRR method? That is how I get my rentals. It builds in equity and helps me exceed the 1% rule every time. Also, get connected with your local wholesalers and other investors. You'll find much better deals off-market. Also, play around with the BiggerPockets calculator if you haven't already. It will help you get more comfortable with what is a deal and what is not.