I live and work in Northern Virginia. My primary residence is a very small townhouse/condo, primary mortgage is paid off, but has a HELOC with $40k balance @ 1.99%. I took the HELOC to payoff the mortgage and avoid refinance costs.
In 2012, I purchased an anti-moustachian property in the same area for $410k, 20% down, 3.375% 30 year fixed, 2 car garage townhome, 3000sq ft including garage. I lived in it for few months and decided to move back to my condo. The house is worth $500k now. It is rented for $2300/month and renters maintain the house reasonably well. My monthly expenses (Interest, tax, HOA, Insurance) are $1440 (I don't count principal as that is going directly to my equity). I reserve $100 per month for maintenance, so total expenses are $1540. Rent is $2300. Thus, my monthly income is 760. Annual income is $9120. Annual ROI - $9120/$80k = 11.4%. Over time this % increases as Interest payment diminishes in a mortgage and rent goes up. Clearly, this property flunks 1% rule.
After reading more about 1%, 2%, and 50% rules, I started digging up more around my area and discovered that if I sell this property and invest 1 hr out west in Charles Town, WV or Bunker Hill WV, I can get rentals which would be closer to the 1% rule. I could sell my rental, take the $200k equity and pick up 3-4 townhomes (or even more) at $150k each with 25% down and I could collect about $1500/month rent on each of those properties and meet the 1% rule. Quality of renters might be an issue and these properties will end up taking more of my time as well. I wouldn't mind quitting my full time job in the near future and focus exclusively on rental real estate. I do plan to get my license this year.
About me:
I am single, age 30, and have about $200k in stock market (taxable and tax-deferred). Cars are paid off. I'm a bit risk averse when it comes to primary residence - I wouldn't want to use HELOC on my primary residence for investments.