Real Estate, Property & Homes
Very well explained!
I use to think 1% rule was great with real estate until I started getting into crptocurreny….If I invest $100,000 in real estate, I only get $1,000 cashflow…that is considered horrible in crypto currency. In cyptocurrency if I invest $100,000, I expect at least $9,000/month from some platforms, and that is very very very conservative. But for me, I would expect $30,000/month or even $60,000 on some hidden coins
Most people would get 7-9% p/a. To get 1% per month is equivalent to 12% p/a . It's unheard of. I'm calling B.S on this.
What kind of property is 40k? Mobile homes?
Hello Morris I have a question let's say you have a property and the main components check out good the roof electrical water heater window plumbing etc. However the property just needs some cosmetic things to make it more appealing to the eye. Can you do a video on a general budget that you have for your fixers? For example I don't spend over .25 per square foot for tile or I don't pay over $2000 for new cabinets or I don't pay over $200 for light fixtures. Im asking because sometimes the prices for materials seem good and you look up and you will have blown your Reno budget…thanks I hope my question makes sense.
I am from Quebec in Canada, it takes min 6 months to kick someone out and the 1 % rule dont exist. Everything is more expensive than that because of our low interest rate
So my $125k house which pays $1,650 mo & $145k which pays $2,350 mo isn't too bad.
I love your voice and delivery, Even if I wasn't into this stuff I would watch.
I love your videos! The information you provide is very useful and easy to understand. I'm a college student, and many of my professors aren't able to explain things as clear as you can. I'm very appreciative of your channel. Thanks.😊
I thought the money, you get from your rentals was only called "cash flow," only, after you accounted for all expenses already!!?
I have 2 rental properties. If i pay the mortgage off. I wouldnot be able to deduct my interest on my tax.. i wonder if which way is better off.. pay off mortgage or keep the mortgage so i can deduct thr tax? It may be a dumb question.. but hope someone can break it down for me
Interesting topics, unfortunately this rule doesn't hold true for properties in The Netherlands. Our building methods are much more durable than standard American housing and therefore far more expensive. We are happy to get a return of some six percent on a yearly basis. But still thanks for your videos. They are definitely food for thought.
While the 1% is a good rule of thumb, it is meant to calculate GROSS RENTAL INCOME and not CASHFLOW. Please use the correct terms in future videos.
So if i buy a $1 million property then my net cash flow (Rental income minus PITI minus HOA) should be 10k? Are you sure?
Wish you would use cashflow different than income. Passed this around the lifestyles unlimited club and everyone thought you were nuts until they realised the definition of cash flow to most is "what left after expenses" but is different in this video.
That said, 1% is easy. 1.5% means you well above average. 2% we are looking for an adjustment in the market coming because something is upside down. Unless you are buying the complete gut jobs in a war zone (one friend has about 30 of them).
Very useful. Thank you.
But how do you find out the cash flow of a property?
Clayton, I love what you're doing here. I've been in real estate investment for 10+ years now and you're spot on. In the future is there a way you can throw the math on a whiteboard?
Seems impossible to get 1% in booming cities like NY, Boston and San Francisco… in Boston you are lucky now to get 1/2%. Maybe with development you can get 3/4% but its hard. I often think about the places that get the 1 or 2% and feel they are a lot more work and with very little appreciation. The appreciation you gain in just a few years in one of these mentioned cities may equal the total "bonus" cash flow you get renting out a 1% rule home for 10 or 20 years . If this is the case I don't see the sense. what I do see is tat not everyone has the money to buy big in places like In Boston which 500k is a purchase price starting point and although you just get your 1/2 % your making a killing on the short term appreciation. for areas far outside the city (the 1 % or more places) your starting point can be only 50k or so and your pulling in that "bonus" cash but it seems like so much more work, more/tougher tenants, more reno etc…. Just my guess.. .curious what others think?
Greetings,I want to ask a question: This 1% rule is for the purchase price only, without any RENOVATION expenses?Example: We buy house for 40 000$. We need rehab for 15 000$. With the 1% rule we seek to be rented for 400$ (1% of the purchase price) or 550$ (1% of the purchase + rehab)?
Great video, I like that rule!
Borrowing from Investopedia: "Cash flow is the net amount of cash and cash-equivalents moving into and out of a business."
Thank you for your videos. I've now interviewed 3 Turnkeys and found you to be the best bet(all thanks to your videos on doing my research) Can't wait to be buying 2 from you this year!!!
Is this rule on a monthly or annual basis?
You are amazing
You obviously live in high return area. In my city (Ottawa, ON, Canada) it's around 0.5%.
i live in california. why does it seem like the only way i can come close this 1% rule is if i buy a large class c apartment complex? in my area, a single family home that is $300k or more will only rent for MAYBE $2k/month, last I checked..with this in mind, should I not invest in my area?
Have no idea where these 100-400k homes are? I live in bay area…
What if the house appreciates do you use the appreciated figure or only the money you have in it? I think I am content to use the figure I have in it, but curious what you think.
+Morris Quick question… it’s kind of impossible to apply that rule where I live (north of Spain). Here cheaper flats 1 bedroom will be around 70-80k but at max you will be able to rent them for 400€/month… does this mean I should give up on starting a real state investing career here?.
Thanks again Clayton. Great guideline! Math and logic…great concept!
Loved it. Thanks. So we'll explained.
Where I live even 0.5% a month would be an absolutely insane steal. :/
so if i buy a house $165000, then i should have cash flow higher then $1000?
I have found criticism for your turnkey properties in a website saying that your turnkey agents were so busy to respond to clarifying questions from your turnkey customers. I am considering buying a turnkey property so my question is: Do all your available turnkey properties really provide ten or twelve years without needing costly repairs in the six areas, a) roof, b) windows, c) electrical, d) plumbing, e) furnace, and f) water heater?If I get an answer, I appreciate.
I wish I saw this when originally posted, what if you're able to get more than mortgage monthly cost but it's under 1%?
Is the 1% rule before or after taxes and insurance etc?
I bought 9 properties for cash back in 2011 for around 10k – 14k each. I get 725-850 for rents. They paid themselves off in 1.5 years. Now profits are 500-630 per unit.
Just sayin' millionaire does not have the meaning it used to have. Gotta' be at least a multi-millionaire nowadays or you can't even afford a nice well-over 1/2 million dollar home. In Denver, 1/2 million barely buys you an average house. People renting a $40K-$50K home in middle America live better than a millionaire in the Denver area. There ain't no nice $40-$50K homes in a nice neighborhood with decent schools in the Denver area.
I am looking at a home that I am trying to purchase for 120k. I can rent it for $2300/mo. According to your theory, this is nearly 2%, correct?
Great video , thanks.
Are any of your properties SEC8?
How do I calculate this without knowing what my refinance payment will be??
Hello, I own single family home in Colorado. 3 bedroom 2 car garage with a over grown yard. It's been a rental for 8 yrs with the same renter. They were in it when I bought it. I owe 145,000., it rents for 1,300. Obviously it doesn't meet the 1% rule. Two different realtors state it "could sell for 235,000ish with all new floor coverings, entirely painting the interior. Replace old formica with new formica countertops. By the time I pay all the realtor / transaction costs. And improvment costs. I don't see that I would have enough money to find another property that would be a better investment property. I'm currently cleaning, tearing out carpets and scrubbing the boiler heat registers as I'm trying to decide what to do with this thing. I live 7 hrs from this property in a different state. Sincerely, unsure Bret
This guy is sadly mistaken. A house Rarely if ever rents for 1% of its value. And hes talking about the possibility of 2%? Is he insane? If he can find someone who will rent a $200,000 home for 4k a month, props to him. But I think a more real number is more like 0.8%
Clayton, I just got $45,000 of credit from Fund and Grow! (Thanks to you). And we just pulled money out of our 401K to cover the remaining purchase amount. We are about to buy our first all cash property from Morris Invest. In our household, I've replaced "Dave Ramsey says" with "Clayton Morris says". These videos have built your credibility enormously in our minds and it's allowing us to put our money into one of your properties confidently. Thank you for changing my family's life for the better. I hope to check in with you in 8 years when I've accumulated 50 rentals like you guys did.
1-1.5% properties is always pretty hard to find in hot markets. If I would buy in Kansas, Ohio, Oklahoma, then yeah, even 2% is very possible. Numbers on my first duplex in Austin, TX, purchase price – 316k, gross rents are 1300 x 2 = 2600, which is 0.82%. And that's a better ratio than vast majority of small multifamilies on our market. You still can find 1% or higher in suburbs or San Antonio markets, but appreciation rate in Austin beats them all. Also, I'm buying below market value with small repairs needed, and neighborhood is great, close to Apple and other tech companies offices. That helps a lot.
Lot of people here saying 1% can't be done… maybe not in your market. There are totally properties out there that can do 1%. I have a 6 unit apartment that cash flows 5% every month. You have to look for them, they're out there.
Got my first property 11 months ago for 22k rents for 750. Just bought my second property a week ago for 22k it will also rent for 700-750. Both of my properties were found on the MLS. The deals are out there. I love your content Morris Invest! Your content has helped me take the leap and stop talking about and finally do it!
i haven't seen you since you left fox news. haven't watched since. from fox to youtube, hmmmm. hope you are doing good.
I own residential houses make 30% of all rents and that's gross
Is it supposed to be 1% after hoa and all the other stuff? So if the unit is 100K do I need it to net me $1,000 after all taxes and hoas? Or is it 1% before we lay the other stuff on?
how come the bigger companies didn't buy all the properties yet? is there some legal restriction o. the amount of properties an entity can own or just an ethical barrier that we shouldn't cross? Might sound silly but want to know the answer.
Where can I obtain a spread sheet to plug in numbers to see if I will be at 1% or…
Trying to close a property that is a 2% rule
Very useful information. Thanks for sharing it with us. You have a new follower.
It depends if the property is in a good area and newer property built within 2 to 3 yrs maybe getting a little bit under 1% is probably ok.. There will be less expenses in maintenance as compared to buying an old building that needs a lot of work.. repairs will eat at the profits
Great material very educational! By far the best teachings I’ve seen on real estate! God bless you and your family.
In Sydney, Australia it is approx 0.5% per month return but the property value appreciates approx 4%pa(historically). Could you please share video on how foreign investors can invest in US real estate market. Thanks
Also remember that rents go up as purchase price stays constant. If you start out with a 1% cashflow, it will be higher down the road.
You said 1% CASHFLOW on a $100k dollar home. That's highly unlikely.
You keep referring to Cash FLow, without defining that. To me, cash flow is Net Operating Income, minus interest expense if you have a loan on a property. I see that Kevin Jacques made a similar comment a year ago. I think what you mean to say is "Gross Rent", not "Cash Flow" when explaining the rule.
Great video! Thanks! I try to stay 1.5 or above.
I’m confused. You have a video that talks about roi. I want to buy a multi family home at 100k. my roi would would 25%. But if I go by the 1%rule, I’d have to make 1000 a month. At 1000 it wouldnt make the 1%.
Where are you going to find 50k property? in TJ.
OMG get on with it….. Also, I thought the 1% rule had to do with rent income not cash flow.
I think another way to think about this is a GRM (gross rent multiplier) is 8 or less. Ok, then why do people pay 18-20x gross rents in NYC? Because new buyers think they can kick out rent-controlled tenants or they are from South America or Russia and are hiding money in NYC so they don't care about the 1% rule or the gross rent multiplier. Keep in mind areas with a GRM or 6 or 7 could meet the 1% rule but the tenants don't pay rent! I'm evicting lots of people in Sweet Home Alabama, chop chop!
Excellent If I understand correctly then one should sum up all costs ie taxes etc and the rent should be at least 1% of the price paid for property after subtracting expenses for eg expenses $1000 per mth then rent received should total 2000 .
This is why I can’t ever find condos or town homes that make sense. You can’t make the numbers work very easily when you’re paying HOA fees.
So should the 1% rule be complete AFTER expenses are completely calculated? I’m assuming that’s what you’re saying…thank you
Shouldn't the 1% rule be applied to net income instead of gross income?
Do you have a video explaining how to run the numbers to determine what a property is worth?
Always remember that rules of thumb are just that rules of thumb, used as a very very very early way to qualify a potential property but certainly isn't the end all be all on investing.
Sorry but don't like your large videos but liked this one pretty much 👍
1% cash flow after all expenses or before?
Is 100k purchase price net 500 per month after all expenses paid a walk away deal?
This is a great tool for a quick evaluation of the property. Thank you very much.
Where in the Sam Hill do you find properties to buy for $25,000 in 2019???
All you people are confusing rent gross price with cash flow. Cash flow is what is left after all expenses are paid for. A 1 percent Cash flow in this example means he is getting 1k free and clear after paying all expenses including mortgage and that is highly unlikely. Learn the terms correctly.
Good explanation, Thank you!
Thank you as always. I just run into your video 7days ago. I have learned so much. I am ready for Action. I look forward to talk to ur Team Monday.
is the 1% rule from the total price of the house or from the mortage amount ( price of the house minus down payment ) Thank you for your help.
If i bought the house for 145000 and paid 20% down, the loan amount would be 116000.Should i calculate 1% of 145000 or of 116000.?
I found it's impossible to meet your 1% rule in Los Angelas area not even in a ghetto neighborhood. Is there a rule for appreciations?
Let's see you try that 1% rule in the Los angeles or San francisco area
Thank u kind sir! I appreciate the knowledge from u as a father figure .
Oops ive been using the 1% rule wrong..ive been figuring it after rehab cost and after taxes and insurance.. So ive been really using a 1.5 percent
California houses are like 500K. No one will rent out 5K per month for a 1940 built houses
I just bought a 1 percent rule duplex, extremely nice area very high appreciation and high cash flow because the previous owner decided to replace and keep up great maintenance on the building. It’s possible you just gotta keep your eyes open
i am from Romania,I have 3 apartments ,1 I bought in 2016 with 37000 euro,rent with 230 euro,and now in 2019 the value is 48000 euro……one 1% is not realistic in our country….
What have most of you guys buying as far as condition? I usually buy stuff that doesn't need much work so I can finance it with little out of pocket after I buy. I like to get in rented out quick. I know some guys buy cheap but then they spend months fixing up and paying contractors thousands out of pocket. Thoughts???
This doesn't seem right. I'm in San Diego and the average house is 500k but the rent would be around 2,800. Also in Arizona I build houses for 200k worth 300k but if I rented them I would only get 1,800 and I build them for wholesale prices. Can someone please explain?
Great info !!!!!!!!!!!
So this rule is basically impossible in ontario canada where in a CHEAP city, a average house is 450k, rent does not go higher then 2-2.5k
You should delete this video. You're spreading misnomers.
hi from Italy, I totally agree. but I got 1,5% gross only when i have purchased from foreclosure (forced sales promoted by banks and courts) , never done in "regular" market. it depends on many aspects but i am sure many deals are just out there
Kinda confusing?? When you say cash flow what do you mean? Most people say cash flow as after expense like clean income after paying mortgage tax expenses and future repairs.
What should be the net %? For me I was breaking even on a rental at 1.5 gross. Interest was brutal plus insurance plus property management plus property tax and so 9n
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