The 1% Rule in Los Angeles

[Bryan Kelly]

Team:

I understand the 1% rule, however, is this really achievable in larger metropolitan areas such as LA? Also, even when looking for property in Atlanta, the best that i was coming up with was .7%, but I am still able to cash flow. I was not able to fine that 1% rule anywhere in Atlanta. With how inflated the market is right now, is everyone purchasing on a curve?

[Nathan Gesner]

Quote from @Bryan Kelly:

The 1% rule, 2% rule, 50% rule...these are just general guides used to quickly evaluate property and filter out bad ones. They are not hard-and-fast rules to live by. You need to learn how to use them, adjust them to your market and your goals, and then implement them.

Here's just one article explaining it: https://www.biggerpockets.com/...

You are unlikely to find property in LA that would rent for 1% of the purchase price. Most markets work well for cashflow or for appreciation; few work well for both. In 2019 you could buy a house for $75,000 in Columbus that would cashflow well, but it would only appreciate 10% in ten years. Meanwhile, a $400,000 house in LA wouldn't cashflow, but it would appreciate 50% - 75% in ten years. Beginning investors are drawn towards the cashflow while experienced investors with more money would invest in LA where they can get a bigger payoff.