1% rule

[Gary Baker]

rules rules rules.
The good old "rent should be a minimum of 1% of the property value to make ends meet" is failing currently. With housing prices in the DFW area rising rapidly there is no way the existing market could sustain this rule.
I ‘guestimate’ that rent is running on average of 0.75 to 0.9% or worse on property values. What are BP's thoughts on making money from rent when the market does this? Understandably those who have bought 3-4 years ago, now have the equity and they will gain as they can raise their rents, but new entrants will be faced with less cash flow and risk. For some markets the lower percentage is normal and investors hang off the longer term capital gain in the property.
Any thoughts and advice on making money in this scenario?

[Todd Plambeck]

What price range are you looking at?  Generally the lower the price the higher the rent to price ratio is.  I guarantee you can find some houses in south Dallas or east Ft. Worth for $20k that will rent for $750 a month.  You can also find a $300k house in Keller that may bring in $2200 a month.  You need to find the sweet spot in that range between the I'm gonna get shot at trying to collect rent to the I'm losing money on this really nice house.  You need to find houses that need repair which will eliminate the bulk of the retail buyers and give you a negotiating point to get a better price.  Watauga, Richland Hills, and Haltom City are probably your best bets in your area.