Is there any market that still meets the 1% rule?

Investor · Member since 2021 · 7 posts · 9 votes

I am looking for long-term rental property investment opportunities but none of the cities that are published as best places to invest meet the 1% rule. I looked into Huntsville, AL, and Columbus, OH which are referred to as the best places to buy real estate recently. Am I missing something?

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Alecia LovelessPro Member

Member since 2019 · 3k+ posts · 2k+ votes

@Gagandeep Singh If you analyze lots and lots of deals you should eventually turn up some that are stronger than others. I've had two in the past five months that are at the 2% level. One has needed about $60,000 in work but will be a power house when I go to BRRRR it around December.

The second I’m getting ready to close on shortly and the appraisal came in right on point and we’re taking a leap of faith in the amount of money we have to put into it that down the road we will get that back out. This one when all is said and done needs around $90,000 in work.

I think right now there’s a lot of greedy sellers who just think the sky is the limit and don’t care that their buyers need a return on their money. Which if you can pay cash and assume you will get your cash back when you sell is fine but if you need a mortgage you still have certain margins you need to meet.

I see a lot of people singing the praises of the Midwest markets for good returns but just tonight there was a post about one investor who was three years in and waiting to break even.

Investing is a long game. It takes time. It takes patience. If you rush into a deal just to buy something you will get burned for sure. I definitely wouldn’t buy anything that didn’t meet my criteria. So make sure you have set your criteria and you stick with it even if you do change markets.

If you change markets build your team first or part of your team, and then start searching for good deals. If you find a good deal and have no team it’s a lot harder getting things together.

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Lindsay DavisBusiness Member
Real Estate Broker · Birmingham, AL · Member since 2019 · 327 posts · 203 votes
3y
@Gagandeep Singh,

@Gorden Lopes is right about Huntsville—it’s one of the more expensive markets as far as places in Alabama go. If you prefer rentals in B or B+ neighborhoods instead (mainly for higher tenant quality, lower crime rates, and better long-term appreciation potential) and don’t mind broadening your search beyond Huntsville, other more affordable locales in Alabama—like Birmingham, the state’s largest city—could be a good fit.

We’re active in suburbs on the west side of Birmingham like Adamsville, Forestdale, Sylvan Springs, and Pleasant Grove, and a good portion of properties there meet the 1% rule. Specifically, properties in those neighborhoods sell for about $100,000 to $120,000 and can rent for roughly $1,000 to $1,300 per month.

If you’re set on investing in the Huntsville area, there are several lower-cost (yet steadily growing) locales about 25 to 35 miles away—namely Decatur, Athens, and Guntersville—that have properties that meet the 1% rule.

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Spencer SuttonBusiness Member
Investor · Birmingham, AL · Member since 2015 · 119 posts · 148 votes
3y
I just had a conversation with an investor agent in Jackson, MS who is getting deals within the 1% rule from local wholesalers. These wholesalers used to sell to institutions but now that they're not buying as much, they're searching for retail investors.
His name is Jim Strickland and he's a broker with Evernest.
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Greg ParkerBusiness Member
Realtor, Contractor, Property Manager · Montgomery AL and Kowaliga, AL · Member since 2017 · 669 posts · 536 votes
3y
We have to fight to find them, but here in Montgomery, we can still be all-in for 110k -120k and get 1,100 - 1,200 rent.
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Crystal SmithPro Member
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Real Estate Broker · Chicago, IL · Member since 2014 · 2k+ posts · 1k+ votes
3y
Quote from @Gagandeep Singh:

I am looking for long-term rental property investment opportunities but none of the cities that are published as best places to invest meet the 1% rule. I looked into Huntsville, AL, and Columbus, OH which are referred to as the best places to buy real estate recently. Am I missing something?

There are a ton of "Best Place To Invest" reports. Each of them has different criteria for why someplace is the best. Very few of the reports use the 1% rule. I recommend you post a link to the report that showed Huntsville and Columbus.
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Alecia LovelessPro Member
Member since 2019 · 3k+ posts · 2k+ votes
3y
@Gagandeep Singh With lots of analysis and scrutiny and careful research I am finding deals that are meeting the 1% rule, some that are even meeting 2%.
I’ve been told you can’t really use this metric for deals that have more than 4 units but I don’t see why not. I’m not talking about huge deals with 100+ units where you get lost in economies of scale, but rather deals that have under 10 units.
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Dan Rowley
Investor · Cary, NC · Member since 2012 · 218 posts · 196 votes
3y
It's not difficult to find properties that meet the 1% rule, but be careful what you ask for. Probably they are older or distressed properties in undesirable neighborhoods certainly they can be found. But would you want to buy and/or manage them?
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Kamaldeep Gaheer
Member since 2024 · 4 posts · 2 votes
2y
Quote from @Travis Biziorek:

Detroit is the answer. I own 12-doors there.
There are plenty of 1%+ deals in the city but you need to understand the landscape. Please don't just go in and start plucking "deals" off the MLS. This is how folks get burned.
I know Ohio has become extremely popular but it feels a bit too hot for me.

Hey Travis, which areas in Detroit are you referring to? I live in California but i am familiar with the area since i started my career there.
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Travis Biziorek
Investor · Arroyo Grande, CA · Member since 2014 · 1k+ posts · 1k+ votes
2y
Quote from @Kamaldeep Gaheer:

Quote from @Travis Biziorek:

Detroit is the answer. I own 12-doors there.
There are plenty of 1%+ deals in the city but you need to understand the landscape. Please don't just go in and start plucking "deals" off the MLS. This is how folks get burned.
I know Ohio has become extremely popular but it feels a bit too hot for me.

Hey Travis, which areas in Detroit are you referring to? I live in California but i am familiar with the area since i started my career there.

That's a massively loaded question with no short/easy answer.
You can find 1%+ rule deals just about anywhere in Detroit proper but that doesn't mean you should be buying them all.
Where to buy in Detroit is just as much art as science. It's a massive city and can change drastically from block-to-block.
If you want some resources I'm happy to send some your way if you DM me.
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Kamaldeep Gaheer
Member since 2024 · 4 posts · 2 votes
2y
Travis, When i lived in the area, the urban blight in areas south of 8 mile road was incredible. I am sure a lot has changed since 2008, lol. I mostly stayed in the northern suburbs. would really appreciate resources on ground over there. If you could recommend a realtor and property manager that you trust and like, that would help. Also your recommendations of safe areas with good roi would be appreciated. Thanks

Quote from @Travis Biziorek:

Quote from @Kamaldeep Gaheer:

Quote from @Travis Biziorek:

Detroit is the answer. I own 12-doors there.
There are plenty of 1%+ deals in the city but you need to understand the landscape. Please don't just go in and start plucking "deals" off the MLS. This is how folks get burned.
I know Ohio has become extremely popular but it feels a bit too hot for me.

Hey Travis, which areas in Detroit are you referring to? I live in California but i am familiar with the area since i started my career there.

That's a massively loaded question with no short/easy answer.
You can find 1%+ rule deals just about anywhere in Detroit proper but that doesn't mean you should be buying them all.
Where to buy in Detroit is just as much art as science. It's a massive city and can change drastically from block-to-block.
If you want some resources I'm happy to send some your way if you DM me.

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Michael SmytheBusiness Member
Real Estate Agent · Metro Detroit · Member since 2023 · 4k+ posts · 3k+ votes
2y
@Kamaldeep Gaheer we've got all 183 Detroit Neighborhoods mapped on our website, which may help you better understand how Detroit has/is changed/changing:)
We've also got them all Classified as A, B, C & D, but you have to DM us to get that info.
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Mike H.
Rental Property Investor · Manteno, IL · Member since 2009 · 2k+ posts · 2k+ votes
2y
Be careful on the 1% rule. Some areas in the country have property taxes and/or insurance that are far worse than others. In tennessee I see 300k homes where the taxes are less than 1k a year. Here in illinois I see 300k houses where the taxes are 10k a year. Thats a huge difference in cash flow.

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