Rent rates and rising house values

[Earl Kamps]

I am aware of and follow the 1% "rule" when analyzing a new property and setting rent rates. Now I would like to have a discussion what Landlords are doing with rent rates seeing that property values have went up so much. Are people setting rates according to the 1% "rule" in relation to the higher values? House values have gone up 20% or more over the past 2 years, Have existing tenant rent rates gone up 20%? Is the 1% "rule" still doable on new properties purchased or new tenants?

Hoping for a lively discussion

[Nathan Gesner]

Quote from @Earl Kamps:

The 1% rule should not be your sole criterion for an investment. It is a filtering device investors use to quickly rule out homes that are not worth analyzing. Rather than deeply analzye 100 homes, you can quickly analyze them with the 1% rule, pick the top performers, and do a deep dive on them to see which ones are actually worth investing in. 

It doesn't even work in many markets. If you go to Jackson Hole, Wyoming and look at homes, you will never find one that rents for 1% of purchase price. Ever. If you go to Parkersburg, WV then you should have no problem finding a home that rents for 1% of purchase price, maybe even 2%.

You need to know your market. In my market, homes tend to rent for 0.7% or less of the purchase price. When I look at homes for sale, I know that anything capable of renting for 0.8% of the purchase price - or better - is worth looking into as a potential investment. It helps me filter quickly so I don't waste my time.