@John Gentry
Hey John, it seems like you may be overthinking it a little bit. It looks like you might have the answer to your question inadvertently.
Your original post said that they bought the house for cash. This means that they wouldn’t have a mortgage payment every month. Their only absolute expenses would be taxes and insurance.
The 1% rule is a good way to evaluate rental properties quickly because most rentals that meet this rule will have at least some level of positive cash flow. However, this is usually used when people are putting an up and average down payment such as 20%, and they are financing the rest.
Using your rental estimate of 1800 and let’s say 100 for taxes/insurance for easy math. They would cash flow 1700 per month. They would be wise to put away some of that for repairs and capital expenditures such as a new roof down the line. But overall, they are pocketing a lot of cash every month because they have virtually no expenses.
Another factor to consider is the market. You said that 250k is the top when they bought it. That is probably a correct statement. But if their plan is to keep the property for 10, 15, maybe 20 years, then more than likely the value then will be higher than 250k and they will profit from appreciation when they sell as well.
The real debate, one we can’t know the answer to, is whether this was an average, good, or great investment. It won’t be bad because they aren’t losing money. But we have no way of knowing their other options.
Those are my thoughts anyway! Hopefully I read your post correctly and didn’t miss something. But these are my thoughts from my understanding anyway!
