1-2% Rule

[Chuck King]

Are any investors in the Charlotte, NC area having trouble getting between 1 and 2% of purchase price for rent? Reason I ask is because I had a conversation with someone recently and they thought I was insane with expecting 1%. Also, can anyone give me some insight on local cap rates. Thanks In advance

[Jennifer Lee]

I think all these rules are guidelines and screens are all well and good

at the end it's your own comfort zone!

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I buy 200K and my clients buys 10-100K, they think I am crazy bc we are in the same "market" why do I choose to buy 200K+?

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In my good school, good desirability and safe areas I have higher rents but make lower % return. 

230K duplex, 70K to rehab it (was gonna flip it), rented 1700 and 1650, or 3350/mo. My tenants are professional, and credit score of 800+. that is about 11% cap or CoC return b/c I am cash buyer. I am very happy with that. but it was a $300k investment.

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One of my client bought in section 8 warzone.

30K duplex, rents 800 per unit, that is 1600 a month. that is almost 50% projected cap. BUT I think she is negative.  in the 2 yrs she owned it, she evicted 3 professional tenant. and lost rents.

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One of my other client bought in not so desirable area.

20K Duplex, for rent at 550 & 650, also about 50% projected cap. still VACANT since she bought it. because all the applicants are 500 credit score and/or have background/eviction issues.

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So with the 1-2% rule

my 230K Duplex is 1.4%, I am now full leased in 8 month rehab 11 % cap

30K Duples is 5%, client has tons of headache with eviction and breaking even in 2 yrs, and had tons of Renov, repairs and fines

20K Duplex is 6%, client has not yet seen any return 1 yr now, minus renovation of -$20K