In today’s episode, we talk about the death of the 1% Rule in real estate investing.
“Rules of thumb aren’t bad, but they can get in the way of good investments.” -Kevin Clayson
The 1% Rule is a rent to price rule that has dictated the “what makes a good investment property” conversation for a decade.
This rule was the judging value of whether or not investors wanted to look at a specific property. Since it is just a simple metric (based on what the rent is and what the purchase price is), following it religiously led many people to overlook good deals and waste time where they could have been receiving cash flow.
The unspoken part about the 1% rule is that only about 1% of the properties meet that criteria. That’s very few properties. The truth is that this rule does not work and is no longer a viable way to evaluate a property.
Dive in to get all of the details.
- Introduction (0:00)
- The death of the 1% Rule (6:22)
- The unspoken part about the 1% Rule (8:58)
- The importance of calculating the opportunity cost (11:04)
- Properties have multiple profit centers (14:25)
- A sports analogy to deepen on these concepts (25:00)
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