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Today’s insights from the blogosphere and beyond:

• Selling a Fund: Things You Need to Avoid @ FundsZine: Some good advice to consider before selling a mutual fund.
• Which Investments Are Best for a Roth IRA @ GetRichSlowly: An in-depth look at investment options for a Roth IRA. I would add that the right investment approach for a Roth IRA would also be applicable to a regular IRA, a 401(k), or any other retirement account. In a taxable account, you would make different selections because of taxes. For example, I diversify my portfolio across both taxable and retirement accounts, putting in the retirement accounts the funds that generate the most taxable gains (e.g., REITs and bond funds).
• Consumer Hit–Phone numbr (previously known as Craigsnumber) @ Journey 2 Retirement: Craigslist now let’s create a temporary telephone number that, when dialed, is transfered to your number. That way, you don’t have to give out your home number when you sell something on Craigslist. Now that’s nifty! Here’s another tip, you can advertise your rental properties on Craigslist. I’ve had good results with this approach, and of course, it’s free.
• 15 Ways to Create an Hour a Day of Extra Time . . . for Solitude @ zenhabits: I could sure use this advice.

Happy reading!

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?

When I first began looking into real estate investing, I spent a lot of time trying to figure out what criteria I would use in selecting which property to buy. I have built many Excel spreadsheets with mind-numbing calculations and data, all geared to finding that perfect investment property. Having now purchased four rental properties over two years, I’ve developed a much easier way to evaluate whether a property will generate positive cash flow or not. I call it the 1 percent solution, and it works like this–

Will the property generate monthly gross rent equal to at least 1 percent of the total cost of the property?

The total cost of the property includes four things: (1) purchase price of the property; (2) fix-up costs; (3) financing costs; and (4) carrying costs from the time of purchase until the first tenant moves in. Of course, this requires making a reasonable estimate of what the rent will be and the cost to fix-up the properties. With enough experience and research, I’ve found that these estimates can be made with good accuracy. On estimated rent, for example, I usually estimate within a range of $100 and calculate the 1 percent using the mid-range of this estimate. Because my investment properties are all in the same area, I’ve got a very good idea of how much rental income a given property will generate.

A note of caution. In many areas of the U.S., finding a property that meets the 1 percent rule is next to impossible. I invest in the mid-west, and given the high rate of foreclosures, have been able to find properties that generate rents at or near 1 percent of total cost. I am able to finance nearly 100% of the total cost on a 30-year fixed rate mortgage that enables me to generate positive cash flow immediately, even after factoring in an allowance for repairs and vacancy.

I’d be interested in hearing if anybody else uses this or another guide to evaluate potential real estate investments. But I’ve found the 1% solution to be a great way to make money.