7/10ths of a percent rule?!

[Boruch Vann]

Hi Bigger Pockets! I am new to real estate investing, and I seem to have entered the business right as the norms are dramatically changing. The things I read about in books seem to no longer be the norm. Take the 1% rule for instance. Rare is the property today which will yield 1% of the purchase price in rent each month. Right now, I'm working on understanding how to choose a market and build a team. I am simultaneously crunching numbers on multifamily properties in locations I have heard may be good. I am doing this mainly to begin to understand what the new norms are for a good deal considering rapidly rising interest rates combined with much more slowly recessing markets. I want to learn to find a balance. It seems sensible to me that a wise buy and hold investor in today's conditions will "settle" for 6-7 tenths of a percent of the property's value in rental income. This should be sufficient to cover the expenses of the property (including vacancy and capex reserves!) while you sit tight and wait! When interest rates decrease, or alternatively your equity in the property increases significantly enough, you can refinance for a lower rate and then start cash flowing. In the meantime, you have built considerable equity, and are positioned in the market, instead of simply saving cash and waiting for better times.

I have also wondered if, as markets begin to decline in the middle of next year, sellers would be willing to finance the deals themselves at rates far lower than banks in order to achieve closer to the asking price. By lowering the terms of your loan by 3-4%, It may be possible to clinch deals with significant cash flow even while paying high prices.

I would love to hear everyone's feedback!