EquityScout.com hosted this weeks Carnival of Real Estate Investing, which you can read here. The Dough Roller’s article entitled, The 1% Solution to Real Estate Investing, was chosen as one of the Top 3. Thanks, EquityScout. The 1% solution simply states that you should look for rental property that can generate gross rents equal to 1% of total costs. Costs include the purchase price, rehab expenses, finance costs, and carrying costs until you rent the property.
Interestingly, EquityScout notes that in many areas this rule of thumb as fallen out of favor because rents have not kept up with the rising cost of residential real estate. That’s certainly true where I live, which is why I buy real estate in the mid-west. We closed on a 4-bedroom single family home last month. The home was a HUD foreclosure. Total cost was $127,000, and we rented it for $1,350 per month, or about 1.05% of costs, which makes for a great real estate investment. Let us know whether your able to find rental properties that generate rent at or near 1% of total costs, and if so, what’s your secret?
Published or updated March 22, 2012.