Does the 1% rule apply to multi-family as well?

[Jerry Shen]

I've heard of 1% rule for buying rental properties (1% of purchase price in monthly rental income). Does that apply all the way up to large multifamily as well?

[Ian Tvardovskaya]

@Jerry Shen large multifamilies of 5+ units are based on current income generated and your local cap rate. I've never heard of anyone using the 1% or 2% rule for these large commercial units. Key is to buy on actual income per month and not potential. Meaning if you buy a 10 unit that is only occupied by 5 tenants, base your purchase on the income produced by 5 tenants not what it could be with 10.