1% Rule - w or w/o vacancy?

[Kevin Stein]

Hello,

I've got a quick question when calculating the 1% (or 2% or whatever percent you like) rule.  Do you run the calculation against gross rent or net rent?  I'm wondering if people take their chosen vacancy factor into account with this rule?

Example:

$1100 gross rents with a 1% rule = $110,000.00 max offer.

$1012 net rents (after 8% vacancy factor deducted) with a 1% rule = $101,200.00 max offer.

Obviously you would want to get the lowest price possible, but I'm just curious when running this quick and dirty rule of thumb how people are doing it.  Thanks!

[Judah Hoover]

That is a rule of thumb not a rule. Big difference. Don't use that to make offers. Just use it to see if a property is even close enough to do more follow up. All offers should be made based on a much more complete vetting of the property.