Now we're just off in the weeds. Nobody is saying you did anything wrong or that your investment choices didn't work out great. You don't have to get defensive or humble-brag about your finances to justify yourself to us.
We're saying your argument against the 1% rule, based entirely on you personal anecdote, is not useful.
Luck is different than planning/skill. It's ok, I got lucky during the same time period, when I was also in a PhD program and making next to no money. A good half of my net worth is based on buying RE during that time period (mostly primary residences) that appreciated like crazy. Good stuff. But it doesn't mean the *deliberate* investor shouldn't care about the various (1%/50%, etc) metrics we have available to analyze rental properties. Do you want to trust that appreciation will continue as it has for another decade? I guess it's possible but I sure as hell wouldn't buy your place today to rent out.
-W
I agree that we are getting off topic. There are many different ways to make money in real estate. Over the past 4 years on this forum, it seems to me like the 1% rule has become the "only way." I'm just trying to balance it out.
If you can get the 1% rule in a good location, go for it. I did that once. However, based on my personal experience, I see newbies venturing out to very undesirable locations to try to get the 1% rule because they can only get 0.7% or 0.8% in much better location.
I made an average salary of 41,600/year over the past 12 years and managed to turn 50K into 700K of equity with very little effort besides initial rehab.
This is gold.
Yup because it is just that easy!
*sarcasm*
One of my initial points is that more desirable locations provide better quality tenants with much less effort. Yes, you are farther away from the 1% rule, but it's much less work. I think there are quite a few people who agree with me on this point. I don't understand the need for sarcasm.
I apologize if I came off as being elitist. I'm trying to do the opposite. I'm trying to share ideas in hopes that other people can benefit.
Here are some quick numbers
House #1
182K purchase in May 2007. 10K of initial rehab.
PITI= $950/month
2007 rent was $1250/month
2019 rent was $2500/month
2019 home value 390K
Great location.
Within 0.5 miles of Colorado State University
Enrollment is 33,000 and projected to be about 1% going forward
House #2
95K purchase in Jan 2012. 16K of initial rehab
PITI = $675/month
2012 rent: 1250
2019 rent: 1850
2019 value 235K
Good location, but not great.
4.5 miles from Florida Gulf Coast University
Enrollment is 15,000 and expected to flat or minor decreases in next 5-10 years.
They have enough space for "phase 2", but that won't happen for another 10-15 years.
At intitial purchase, house #2 is much better on paper. House #2 meets the 1% rule, but the location isn't as good as house #1.
For house #1, there are no empty lots within 0.5 miles of campus to build additional single family homes. Maybe 2-3% of the lots are big enough to build a 2nd home on a lot with an existing home (including mine). They are building 3 story apartments within 0.5 miles of campus, but not single family homes. Students pay a premium to be in a single family home and be closer to campus. I rent my place for $2500/month because I'm 0.5 miles from campus and the football stadium. If you are 2 miles away, you are looking at 2,000/month for market rent for a similar house. My rental house is also within walking distance of popular bars/restaurants.
For house #2, there is a ton of buildable land within 4.5 miles of campus. The campus location is very non-traditional because the immediate neighborhood consists of 1-3 million dollar homes. You need to be at least 2.0 miles away from campus to get into single family homes that are close to the median house price for Fort Myers, FL (210K). Since 2016, developers have been building like crazy in the surrounding area. It's gotten to the point where my house value and rent are starting to decrease. In 2018 it was worth 250K and now it's worth 235K in 2019. Market rent also went down from 1850/month to 1750/month. I got lucky and my tenants re-newed the lease at the same price as last year of $1850/month. Next year I am expecting to get 1750/month.
I got lucky with house #2 (Fort Myers) based on marketing timing. The Fort Myers house in 2007 was worth 250K. I bought it in 2012 after a major market correction for 95K. Fort Myers really took it on the chin during the housing crisis.
However, when i bought house #1 (Fort Collins) in 2007, it was not after a major market correction. It was more of a normal price in a normal market. It previously sold for 177K in 2001.
There is a huge scarcity of land near house #1. This drives the price up (home value and rent). If you want to call it "luck" fine. I call it "economics" For house #2, the price is starting to go down because the the abundance of buildable land is now being developed. Equally, I do not call this "unlucky"
Here's my prediction. Although house #2 was much better at the point of purchase, house #1 is going to provide a better return over a 30 year horizon. I realize that I could be wrong, but this is my prediction.