1 Percent Hint for Hunting Houses

            There is nothing new to be learned to adapt to the ROI method. It is simply changing the way you go through the steps and applying a few helpful hints each property shows us so that we do not waste time on properties which don’t have positive cash flow potential. As we grow more and more comfortable with the process, we begin to see patterns which lead to success. These patterns are helpful hints. These hints are used by a multitude of investors all about our country.

The 1 Percent Hint

             A property will rent at 1 percent of what the average person would pay for it. Its cash flow, when followed, will be positive. This is of the utmost importance because we are holding our properties not flipping them.

            This not only foretells of the rents we can expect it should tell us which areas we wish to start searching for our potential properties in. If homes in the area are selling for $375,000, we could expect rents to be $3,750. However, if we have only $250,000 available should we save or purchase another property. According to the ROI method we would purchase a property in the $200,000 through 250,000 range and in four months start searching again. It is not all about one deal which builds your wealth; its about purchasing correctly and finding the stepping stone of wealth accumulation.

There are other things to consider when following the 1 percent hint. HOA fees if any, special insurance cost in the area or high property taxes would also affect the profit margin of the area but these would not be factored into the 1 percent hint method. Also, the more expensive an area is the less likely the area is to need to stick strictly to the 1 percent hint prediction. In short, the 1 percent hint method of purchasing properties tends to apply best to lower priced properties. This is also the market where most investors operate.

Lastly it should be noted that this is a hint not a hard fast rule like buying right is. That is to say purchasing a property correctly is nonnegotiable, this is not so with the 1 percent hint. In 2018- 2020 interest rates were at historical lows. Because capital was obtained cheaply the mortgage amounts were abnormally low. Which permitted one to borrow more capital and charge less for rent and still produce a positive cash-flow.  Sometimes a property can rent for around 0.08 percent a yet still have a positive cash-flow but the 1 percent hint is easier to calculate it remains my preferred number and it builds a little cushion into the purchasing equation.

Note: Images on this blog site are from a free source or taken by the author. No image or group of photos is intended to represent the people the author serves. The author does not care about Race (that is a politically correct term that he does not like because we are all of the same Race, the Human Race. He prefers the term ethnicity, color, religion, sex, gender, marital status, disability, genetic information, national origin, source of income, Veteran or military status, ancestry, citizenship, primary language or immigration status.) He is a service provider for all people. We will all rise together when we band together and help one another. Joseph Erwin is a Real Estate Broker, DRE # O2131799, and a CA general contractor # B 696662. He’s a member of the CRMLS and The East Valley Association of Realtors located in the Inland Empire region of Southern California.