The One Percent Rule of Real Estate
Easy Math to Evaluate Rental Properties
So you’re interested in investing in real estate rental properties.
But the learning curve to evaluating and purchasing your first house is
How do I find my first property? How do I figure out if it’ll make money? How do I even know what a good deal look like?
Never fear, enter…
The one percent rule is here to help you do the easy math on rental properties.
What is the 1% Rule of Real Estate?
The 1% rule states the following:
In order to generate positive cash flow, the monthly rent of a property should be at least 1% of the all-in purchase price.
You may have also heard of another investor term thrown around, the
Gross Rent Multiplier
Corollary: What is the Gross Rent Multiplier?
The gross rent multiplier is the
purchase price of the property divided by the annual rental revenue.
This is basically just the inverse of the 1% rule.
Well for that, we need to dive a little deeper into murky waters of back-of-the-envelope real estate calculations…
So why does the 1% rule of thumb work?
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