Yeah, you just don't buy rentals in some markets.
The "rule" isn't dead, the rule remains. Don't buy bad investments.
It sucks if there are no good investment properties in your area, there were none in mine either, think lower than 0.5% for a lot of units.
This is why I bought my first rental property in a city I had visited once, an 11 hour drive away. That said, I bought there because I intend to live there eventually and I wanted to lock in the real estate prices which were low at the time in an area that is the fastest growing in the country.
I had a choice, either invest in a rental there and rise with the tide, or be priced out by the time I would be able to move there (~5 yr timeline).
I then bought a second property a few months later, sight unseen, 31 hrs away on a remote island I had never even been to. Granted, I don't rent this one out. I fell in love with it when I came to close on it and now use it as a summer home, but it would be an easy rental to manage.
I had zero experience with owning rentals when I bought two in wildly different and far away locations. I don't think you need experience to be able to do that, you just really need to know your shit and be able to do thorough research about a place.
I was lucky, DH has a ton of family in the first location, so I was able to tap into enormous local knowledge of the area, which I had done when I fell in love with the city and started researching living there.
I watched countless videos, read endless Reddit threads about what renters were saying about living there and different areas, what kind of people were moving into the area. I spoke to literally every single rental management company in the area, a ton of real estate agents, and inspectors.
I would have had to do the same work for buying locally except that I would have more natural knowledge of neighbourhoods and why properties are valued the way they are.
For the much further property, I took more time. I made literally hundreds of phone calls. I probably spoke to every single property manager in the entire province. I'm also spoke to many contractors to get a sense of what the buildings are like and what issues to look for since I was buying a 110 year old house I had never seen.
Now that I've done it twice in short order, I can say that it's a lot less intimidating than it sounds. Before I pulled the trigger on the first property, it felt like the most insane thing possible. But now it just seems like common sense: do your research, figure out where the actual deals are, buy where the deals are.
It's not rocket surgery. You just need to fully understand the risks and have a plan for the worst case scenarios.
My purchases have turned out awesome. They've taken work, because to get a good deal, you usually need to put in some work, and I hit a hiccup with the first building because I toured it during the pandemic with an N95 mask on and didn't realize that the smoke smell wasn't minor, it was suffocating.
That turned a 2 week cosmetic flip job into a 6 week remediation/exorcism that nearly psychologically broke me, lol. But other than that and a few expensive repairs like a heat pump that caught fire and a sump pump that failed (thanks DIY work of the previous owner!), it's been nothing that a few days and a few thousand dollars can't fix. That could have happened anywhere though.
No matter what, I budgeted for property management, so whether the unit is 20 minutes from me or 11 hrs from me doesn't really make much of a difference.
Basically, if you want a real estate deal, buy where the deals are. And don't be afraid of buying long distance. Just don't be naive and stupid about it.
Until you understand a market enough to understand why various units are valued the way they are both in terms of purchase and rental, you don't have the foundational knowledge to identify a deal.
A property meeting or exceeding the 1% rule should actually give you pause and make you wonder *why* that market is that way.
I was just looking at a property that was around 5%, and I was scrambling to figure out why the fuck that even existed. It wasn't a green light to jump, it was a yellow light to investigate extremely thoroughly.
I figured out why the ratios were so good where I bought my first property, but so did everyone else. By the time I closed on the first property, so many investors had flooded the market that it had become impossible to find equally good deals.
Really good ratios are either temporary blips while the market figures them out, or they are permanent issues with a location and no one is willing to speculate on the real estate market there.
That doesn't make them bad markets to own rentals in. You just need to understand *why* and be prepared to own a property that my cash flow well, but may drop in value or be difficult to sell. What you really need to figure out is if the factor that's keeping real estate values low is also going to kill rental values over time.
