Author Topic: Is the 1% rule ever coming back?  (Read 2928 times)

YttriumNitrate

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Re: Is the 1% rule ever coming back?
« Reply #50 on: March 08, 2019, 08:25:28 PM »
The other question is: Why should the 1% "rule" come back in any location, LCOL of not? I'm not saying it won't, or that it will, but what makes you think it will, a sort of reversion to the mean?

Well, I think the 1% rule is a rough approximation of what you need to make rental properties look attractive relative to stocks if you are only expecting 1-2% appreciation. If people's expectations of future appreciation start to wane, I would expect to see a lot of rental properties converted into owner occupied as landlords cash out their holdings and move to more attractive investments. That would A) decrease the rental supply causing rents to rise, and B) increase the number of listings causing sale prices to drop.

drmoneybeard

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Re: Is the 1% rule ever coming back?
« Reply #51 on: March 09, 2019, 01:02:16 PM »
The jobs are concentrated in small places with limited housing stock

Maybe off-topic, but this is why I think the only real solution to the housing crises in various metropolitan areas is to provide incentives for employers to set up in areas of low housing demand.

CanuckExpat

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Re: Is the 1% rule ever coming back?
« Reply #52 on: March 09, 2019, 04:08:09 PM »
If people's expectations of future appreciation start to wane, I would expect to see a lot of rental properties converted into owner occupied as landlords cash out their holdings and move to more attractive investments.

The tax implications would make this unattractive for many people wouldn't it?

SwordGuy

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Re: Is the 1% rule ever coming back?
« Reply #53 on: March 09, 2019, 07:35:17 PM »
Just put the worst deal I've done on the rental market yesterday.   

$900/month rent with a $70,000 ready-to-rent cost.  That's 1.285%. 

(Would have been $65,000 ready-to-rent cost but the HVAC broke after I bought it and before I rented it. :( Would have been 1.38%.)

Prior properties have been in the 1.6% to 1.7% range.

I think it's a combination of lots of out of town money driving up prices plus we're many years into a boom cycle, so fewer people have to sell their properties.

YttriumNitrate

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Re: Is the 1% rule ever coming back?
« Reply #54 on: March 10, 2019, 08:53:58 AM »
If people's expectations of future appreciation start to wane, I would expect to see a lot of rental properties converted into owner occupied as landlords cash out their holdings and move to more attractive investments.
The tax implications would make this unattractive for many people wouldn't it?
I wouldn't say unattractive, perhaps a bit of a barrier but somewhat on par with selling a stock that had a good run and has now flat-lined and entered a slow decline. There is also the recapture of depreciation, but that only applies to the structures as land isn't depreciated.