Is the 1% rule dead in Arizona?

[Anthony Sigala]

We are all aware of the 1% rule--the gross rent produced by a property must equal 1% of the of the property's acquisition cost. The question being, does this still hold true for Arizona? If not, what metric do you guys use?

[JD Martin]

Quote from @Ken M.:

Quote from @JD Martin:

The 1% "rule" is just about dead everywhere outside of the midwest and some places in the south that are still relatively cheap. Price to rent ratios have skyrocketed everywhere and it's pretty unlikely rent will ever get to a point where it evens back out because at those levels it's just as cheap/cheaper to buy (not to mention most renters can't afford anything like that). 

It's only dead if you are spending too much on your purchase.

 Well, of course - that's obvious - but most people in most places in the US are going to spend too much on their purchase because that's what's available. Years ago I bought houses for $25k in my market. Pretty easy to make 2% or more when you're spending that kind of money. These days I can't buy a lot for $40-50k. Any house here that's sub $100k, on or off market, is going to be so bad it will need $30-75k in rehab. Here once you start passing $1500 in rent your pool is getting pretty shallow. I'm sure I could go to some midwest markets or even some more depressed markets in my region and get better pricing, but that's out of my wheelhouse at this point in my life as I have no desire to learn new markets when I'm closer to the end than the beginning.