1 % Rule Help Please

[Account Closed]

I’m trying to figure out because I’m second guessing myself and over analyzing things.

When it comes to the 1% rule do I run my numbers off the purchase price or what I own in the mortgage?

For example. I purchase a property for 100,000 with 20% Down brings me to $80,000 mortgage. Do I apply the 1% rule to my 80k on on the purchase price of 100k.

Thanks

[Ray Thorsen]

First off the 1% rule is a rule of thumb. Everyone may interpret it differently. My understanding is 1% of the all in price. Meaning 100k purchase and it needs 10k in improvements to be rent ready then the rent needs to be 1100 mo. to meet my interpretation of this rule of thumb. Keep in mind this is usually just an indicator if the property is worth looking at. So if rent comps were 1100 and the list price was 140k I would not look at it based on this rule of thumb. You still need to run the numbers even if you find a 1% property. Property taxes, hoa dues, utilities (if paid by landlord) will easily put a 1% property deep into the red. Property taxes in my neck of the woods are high so I usually adjust the rule of thumb to 1.2 or 1.3 before I may become interested.