Student Weekly Wisdom #4 - 1% Rule with Andrea Weule

Thank you.....

Andrea

those of us who get hung up on the numbers, you just simplified a method that could easily become tedious and cost us so much time, this helps us quickly analyze

Hi Andrea this is Amer,can you help me out with this?

yep... the 1% rule is a must know when buying rentals, even if you're not looking for yourself to hold. If you want to wholesale to an investor who buys and holds, this rule will help you get started in the right direction.

Val

WOW!!! Thanks Andrea! I had heard of the 1% rule, but for some reason it didn't sink in. The way you explained it - I GOT IT. I LOVE IT. How easy is that!!!

Hi Andrea,

Just couple of days Gena taught us the same one percent rule and now it so amazing to get the same knowledge from you which reinforced the concept of 1% rule.

Thank You.
Bimal

I love the 1% rule. It makes everything so much simpler! Good topic,

Karen

The 1% rule is an easy way to help quickly analyzed a buy/hold or wholesale deal. Thank you for sharing! Thom

Super simple formula !!!! AWESOME....... wisdom )

I have been using the 1 per cent rule for a number of years in my rental investments. I add to my 1% rule the strategy of 1% of the investment plus enough to pay the taxes and insurance. This gives an additional cushion on the investment. The exception that I have found is that in some areas the property values appreciate enough each year to make up for not meeting the 1% plus taxes and insurance. In my example if I have a $50,000 investment and taxes and insurance is $2,400.00 a year, my rent would be $700.00. This would give you your base rent of $500.00 plus $200.00 to pay taxes and insurance. The cushion helps if the cycle takes a downturn.

Mossyoak

Hello Andrea,
Thank you for sharing your wisdom about the 1% rule, and the tip of including it when doing a wholesale deal for another buyer. I am still working with wholesalling to build capital, so I will definitely keep it in mind. Now, I also read Mossyoak's advice on having a cushion. It makes sense to have a cushion and consider the appreciation value, yet, the numbers did become confusing. Could you run this tip again in a way that I may understand? Thanks for your time.

I always start with 1% rule as stated in the video. From there if it meets the 1% and I want to continue to investigate the property, then I have to dig deeper.

I find out what the gross rent will be and from there I subtract all expenses (taxes, insurance, property management, utilities, vacancy and reserves). That will give me what my cash flow would be.

There a ton of different ways to run numbers, but I try to keep it simple.

Best of Success,
Andrea

Andrea, I appreciate your quick and simple response. If I may bother you with one more question regarding wholesaling REOs. I am beginning to muster the courage to put in offers that are foreclosure/REO's through agents. When it comes to the signing of documents, it makes me so nervous that if the offer is accepted, and my buyer backs down, I will be stuck with a sue or something. What is recommended when having the agent fill in the document for me, before I sign: "14 days to close"? "All cash offer"? any contingencies I should explicitly state? I'll appreciate any advice on this that you or someone can give.

Best wishes always and may God continue blessing you on your success!

Thank you for that nugget, as I always love a quick way to rule something out! Saves time and energy for the deals that do make sense:)

Have a great week and thanks again!

Jennifer

I always recommend that you have a solid Contingency Clause...

"This offer is subject to a home inspection, the results of which must meet buyers approval within 10 days of acceptance."

That will give you 10days to walk away. You only go longer than those 10days when you have a buyer on the line. Make sure you get earnest money from you buyer. That way if you lose your earnest money because the buyer didn't perform then you can keep their earnest money (to make you whole).

Hope this helps! Best of Success, Andrea

My cousin is using this principle as well for his rental properties. Thank you for reiterating something that I just learned. Blessings to you and your family!

What would you do for those buy/hold investors that you have a cashflowing rental you could wholesale to them? If they don't know about or don't utilize the 1% rule which is a great formula, what can you use in place of it, to taylor it for your your landlord buyers?

This has to be the most simple and easy way to qualify a property! Even in markets that have turned around like Phoenix, you can still find properties that meet the 1% qualification on the MLS

Thanks Andrea! This has made it so much easier when analyzing our deals and being able to determine very quickly if it is a property I will buy and hold. Thank you for sharing!!!

Tina

Thanks Andrea for making it SIMPLE. Simple and Quick, that's how I would like to do my numbers when I get my first deal. Thanks again.