When to apply the 1% and 50% rule to the BRRRR strategy

[Tomeikia Gray]

Hey guys,

My name is Tomeikia. I am a new real estate investor in Kentucky! I'm looking over the BRRRR strategy, and I am wondering should I apply the 1% and 50% rules to the ARV prices instead of the actual purchase prices? Right now, I believe I am going to need that ARV rent to cover the ARV expenses.

Therefore, if I buy a home at $50,000 and according to the 1% rule rent should be $500 (yes, I am aware that purchase prices this low can also go by the 0.8% rule, which would be $400), but if I BRRRR this property to market value of $80,000. I should want to rent the place for $800, and I can see myself applying the 50% rule to $800 method rather than the $500, especially when it comes to covering the refinancing part of the property.

Am I making sense?

[Joseph A.]

Apply it to the ARV, but how much you pay for the property isn't what determines the amount of rent you will get. You should research what the market rent is in the area you are looking to purchase property.