Applying and judging the 1% rule

[Angelo Van]

So i've heard many people talk about the 1% rule. The rule states that the monthly rent should be around 1% of the purchase price.  Now I want to say I do understand this is a rule of thumb and I do understand it's not the way to success but merely an indication or a way to filter options. I also understand that this number might vary from market to market. And I also heard things are overpriced at the moment....

However, I thought let me try to apply that in a real life situation. The number seems high to me. I've noticed when I was reading BP's books that the prices in USA seem fairly low (at least to me) yet it yields nice rents. So I thought let's do it on my Dutch market.

Example; https://www.funda.nl/koop/breda/huis-40055057-wilr...

Single family dwelling; 125m2, upper 60's, 5 bedrooms, 200k (euro).

I looked up similar houses meaning; (same age, rooms, +/- 10m2 more or less, similar location)

Rents varried from 890-1045. And average at 973. 

973/200k = 0,49%. 

This is twice as low as the 1% rule suggests. Is this because of my  market or is this really a bad deal? 

Is this 1% USA specific? If the number would be a little off I'd just tell myself that might be because of a completely different market or over priced properties. But this factor 2 just seems too large to me. Any thoughts about this 1% rule? 

[Russell Brazil]

Yield is a measure of the markets perception of the risk in an asset, the asset class or market. This is true for all types of investing, whether real estate, dividends, bonds etc. The higher the yield the higher the market views the risk in the asset, the lower the yield the lower the risk.

There are cities where you might get 3% or 4% of a properties value in rent, because those are high risk markets. There are other places you might get half a percent, because those are lower risk markets.

Neither is a good or bad investment. They merely are different risk levels. 

Many mistake the yield as the return in the asset, when it is in fact only a tiny component of the return. On a total return basis, the lower yield markets typically out perform the higher yield markets. 

My statements are generalized and generalized towards American real estate.