What's the 1% Rule?

Another way to quickly evaluate long term investments is the 1% rule.

The calculation is easy. Just multiply the purchase price by 1% and the number you get should be the minimum monthly rental payment. Even easier? Just move the comma in the purchase price two spaces to the left.

example

If the purchase price is $300,000, the minimum monthly rental income should equal $3,000.

or $300,000 x 1% = $3,000

Be sure to take in to account any repairs needed.

So, if there’s $10,000 worth of repairs needed, factor that in. That would bring the total price up to $310,000 and the minimum monthly rental income should equal $3,100.

hot tip

Negotiate the purchase price to get you into the 1% range. Or, determine if rents can be adjusted once the property is purchased.

Looking for an agent that understands investment properties in their area? Head to our Buyer’s Survey to be PAIRE’d up with someone that gets it.