Imagine a simple yet powerful tool that helps you identify potentially profitable multifamily properties in a flash. That’s the magic of the 1% rule, a time-tested metric used by countless investors to navigate the exciting world of multifamily real estate. But is it a golden ticket to riches, or is there more to the story?
This article dives deep into the 1% rule, exploring its core concept, uncovering its strengths and limitations, and equipping you, the aspiring multifamily investor, with the knowledge to leverage it effectively. By the end, you’ll be able to confidently assess deals, separate fact from fancy, and pave the way for a thriving multifamily investment portfolio.
What is the 1% Rule?
The 1% rule is a simple benchmark used to assess the potential profitability of a multifamily property. In essence, it states that the monthly rent per unit should be roughly 1% of the purchase price per unit. For example, if a unit costs $100,000, the monthly rent should ideally be around $1,000.
Why is the 1% Rule Attractive?
Limitations of the 1% Rule
Using the 1% Rule Effectively
Conclusion
The 1% rule is a valuable tool for beginner multifamily investors, but it should be used cautiously and in conjunction with a more comprehensive analysis. By understanding its strengths and limitations, you can leverage the 1% rule to make informed investment decisions.