1% rule in an owner occupied multiunit

[Evelina Forte]

Hi everyone, a question about factoring profitability. Do you take a holistic/portfolio view and look at the overall profitability, or an individualistic view of the profitability of each independent property?

The scenario: I currently own a duplex and owner occupy. I am looking to purchase my second duplex, which I plan to owner occupy. This means I will hypothetically have my current duplex with both units rented, and a second (new) duplex with one unit rented, and I will live in the other unit.  

I am wondering how you would factor the 1% rule in this scenario. How would you look at the income potential of the new duplex, since I would not be receiving rent for the unit I occupy. 

Thanks, curious for everyone's input!

-Eve

[Greg Dickerson]

Originally posted by @Evelina Forte:

Hi everyone, a question about factoring profitability. Do you take a holistic/portfolio view and look at the overall profitability, or an individualistic view of the profitability of each independent property?

The scenario: I currently own a duplex and owner occupy. I am looking to purchase my second duplex, which I plan to owner occupy. This means I will hypothetically have my current duplex with both units rented, and a second (new) duplex with one unit rented, and I will live in the other unit.  

I am wondering how you would factor the 1% rule in this scenario. How would you look at the income potential of the new duplex, since I would not be receiving rent for the unit I occupy. 

Thanks, curious for everyone's input!

-Eve

Always look at each deal on its own merits. The 1% rule is a meaningless formula as it only takes into account the gross income and does not factor expenses or debt. You need to analyze all income and expenses per property. You can take an overall view of your portfolio form a total assets, liabilities and NOI perspective to see where you stand on income and net worth but decisions should be made per deal basis.