50% rule and 1% rule?

[Michael Ludwig]

I keep hearing the 50% rule and the 1% rule i was wondering what they are and how would they apply to a house hack?

[Corey Hawkinson]

@Michael Ludwig Others have defined it perfectly but I’ll use an example based on your St Cloud location for the 1% rule. If I were to invest in St Cloud I would need the numbers to be above 1% due to added risks that I see in your market. (Others might disagree with me, and that’s ok) I do like the St Cloud market, I’m just saying that I would want to be at 1.5% on a property in order to buy.

As you get closer to the Twin Cities the numbers change depending on the area. An investor in North Minneapolis will need to be at 2% to make the property work based on the metrics in that sub-market. Higher risks based on the tenants. Personally, I avoid that sub-market entirely.

However, if I’m looking in Edina I could come out ahead if I’m less than 1%.

I say all this to illustrate in the Minnesota market that these rules can be good starting points but you’ll need experience to understand how to apply the rules.