Analyzing a Deal with 1% Rule

[Mel Sims]

Hello Investors-

When you are analyzing a deal, do you use the 1% rule? If so, do you add the other costs into that rent amount?

For example, if I purchase house for $150k, the 1% rule would be to have the rent at $1,500. In addition to that $1500, do you add other costs into that rent, or do you just set the rent to that 1%? 

I've been engrossed with so much reading, podcasts, and forums, that I don't really notice people mention the 1% rule when determining the rent amount. 

Just trying to understand at what circumstance would you apply the1% rule and if any additional factors get calculated in that rent amount.

Thanks,

Mel

[Duane Alexander]

Most people use the 1% rule as a quick analysis for properties to meet before they do a more in depth analysis. The rationale is that if a property meets the 1% rule then it is likely to cash flow positively. Doing a more in depth analysis using something like dealcheck.io or the calculators here on bp will tell you how much that property will cash flow.