The 1% Rule is a simple yet effective tool for screening rental properties. It suggests that a property should generate monthly rent equal to at least 1% of its purchase price to indicate strong cash flow potential. For example, a $500,000 property should bring in at least $5,000 per month in rent.
Why It Matters
Quick Screening Tool – Helps investors identify properties with cash flow potential before deeper analysis.
Avoids Overpaying – Prevents purchasing overpriced properties that won’t generate sufficient rental income.
Guides Initial Offers – Assists investors in making competitive yet profitable offers.
Time-Saving Metric – Allows investors to quickly eliminate properties that don’t meet cash flow goals.
Helps Set Investment Goals – Provides a benchmark for evaluating potential deals and setting clear investment strategies.
Supports Long-Term Wealth Building – Ensures steady rental income, contributing to financial stability and growth.
Final Thoughts
The 1% Rule is a great starting point for evaluating multifamily properties. While it’s not the only factor to consider, it serves as a helpful guideline for investors seeking cash flow and profitability in their real estate ventures.
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