I Hate Rule Of Thumbs

I just answered a post about some 50% rule of thumb thingy. I am not a fan of rule of Thumb. if it was that easy and just plugging numbers into an online accounting tool then everyone would buy real estate and be successful. I buy 4-8 properties a month and I never use a rule of thumb. You can crunch numbers till the cows come home and pencil whip a property into submission but if you dont do your homework and know the market you are going to get burned.

Here is one example where rule of thumb pretty much stinks. I look for properties that are under-performing. How do you know? Well you have to know what the demand is. You need to know what type of apartment in that demographic sells and which doesn't. There are 10 other variables that you may need to consider. So if its under performing and the rents are low and expenses are high does that mean you pass on the deal because the numbers dont work or the rule of thumb says dont buy it. These are where you find some of the best deals because the average investor will pass. What if the owner is a poor property manager, what if the owner is a legitimate slumlord, what if the owner has never raised the rent in 10 years, what if the owner is paying a dumpster bill of $500 a month and you know for a fact that you can get the same dumpster for $250 a month. i can go on and on. Thats where the rule of thumb is BS. You need to know your market better than your competitor. You need to know a good deal and that comes with years of trial and error and watching others who are successful. remember this. If its too easy then somethings wrong.