Author Topic: 10 / 10 / 10 rule?  (Read 4444 times)


  • 5 O'Clock Shadow
  • *
  • Posts: 11
10 / 10 / 10 rule?
« on: November 15, 2016, 10:24:51 PM »
Greetings. I just borrowed the book (recommended in the "book recommendations" post) Building Wealth One House at a Time and got to page 46 "Schaub's 10 /10/10 rule for buying good deals". 

It states....
1) buy at or greater than 10% below market
2) pay 10% or less down
3) borrow at interest no more than 10%

I live in Richmond/El Cerrito, California (SF Bay Area) and was thinking to buy in Sacramento where properties cost half of what they cost in Bay Area. So my questions related to the rules above are
1) how do I know if a property is below market?
2) if this will be my first home but I will rent it out, won't I be required to pay 25% down?

He also recommends to buy in your own city where you know the market best. But since I don't want to such a large % of my net worth into one unit/investment (say I put $60K down, that represents 1/5 of my total net worth), where could I buy given that homes that would bring in a good rental income in my area are at minimum $450K?



  • Bristles
  • ***
  • Posts: 486
  • Age: 41
  • Location: Clarksville, TN
Re: 10 / 10 / 10 rule?
« Reply #1 on: November 16, 2016, 06:21:09 AM »
I think Zillow is a good tool to determine if the property is 10% below market.  Zillow does the same as an appraiser and determines market value based on houses selling nearby and square feet.  It is just a tool though.  The appraiser will ultimately make the call.  One thing to note that a buyer and seller also play a small role.  After all if a buyer is willing to buy at 1M and a seller is willing to sell at 1M then the assessed value of 1M can easily be justified.  My father liked to coin the phrase...  buy the worst house on the street because your value can only go up.

Rental properties and investment properties are pretty much at the bank's discretion.  Just like a small business loan.  You have to be confident and sell them to the idea that you will make money being a landlord.  It is easier for a bank to justify that you have to live somewhere (paying rent or a mortgage) and if it is your primary residence they tend go more off your income (1/3rd rule).  Harder for an individual to justify using a property to make money and invest.

Also there is a 1% rule....  I think Cali would be harder to get that rate.  For example if you buy something for 450k then the rule states you should get at least 4.5k/month in rent.


  • Stubble
  • **
  • Posts: 113
Re: 10 / 10 / 10 rule?
« Reply #2 on: November 16, 2016, 12:55:38 PM »
The one great thing about Zillow is it is free.  It is an algorithm it does not know the condition of the property and any unusual features or drawbacks of the property.  It is pretty much useless for a real valuation of the property.  If you want a real valuation  that a lender values you will have to pay for that.  A realtor can give you his/her opinion which is worth as much as you pay for it.

To me the very best evaluator of property is ...Me!  I learn the area, I study sales I do basically what an appraiser does, look at three comps and make a +/- valuation based upon those comps.  No one is more interested in my investments than --- Me!  Because of that extreme self-interest I will examine the market, and often I am more precise than any so called professional.


  • Magnum Stache
  • ******
  • Posts: 4286
  • Age: 30
Re: 10 / 10 / 10 rule?
« Reply #3 on: November 16, 2016, 01:09:45 PM »
I would avoid Zillow.  It says my 100k house is worth 140k and my 25k house is worth 120k.  Look at actual recent comps in the area.


  • Handlebar Stache
  • *****
  • Posts: 2310
  • Age: 41
  • Location: Pueblo West, CO
Re: 10 / 10 / 10 rule?
« Reply #4 on: November 20, 2016, 03:18:15 PM »
My Zillow estimates are pretty close on two rentals, both single family homes in a neighborhood around the median for the city. Zillow is probably at little less accurate when you get farther away from the median.

Another Reader

  • Walrus Stache
  • *******
  • Posts: 5226
Re: 10 / 10 / 10 rule?
« Reply #5 on: November 20, 2016, 03:38:01 PM »
Sacramento is already shopped over by Bay Area investors trying to get better yields on their investment properties.  You are not likely to find anything that will rent for 1 percent of your purchase price.   Unless 50 percent of your annual rent divided by your all in cost is significantly greater than your mortgage rate, leverage does not help you.

People buying in the outer ring Bay Area suburbs and Sacramento for investment are betting on appreciation, not cash flow.  They have cash that needs a home and are not making good investment decisions.  Values have risen dramatically, pushed up by owner occupants that cannot afford Bay Area prices.  These markets are the last to go up and the first to drop when the market turns.

You will find properties that are cash flowing investments in the midwest and parts of the south.  Buying in most of those markets means trading appreciation for cash flow.  Otherwise, you are better off piling up cash for the next big downturn.

ETA:  If it's on the MLS in a strong seller's market, it's NOT a good deal.
« Last Edit: November 20, 2016, 03:39:41 PM by Another Reader »


  • Senior Mustachian
  • ********
  • Posts: 15319
  • Age: 63
  • Location: NorCal
Re: 10 / 10 / 10 rule?
« Reply #6 on: November 21, 2016, 08:14:41 AM »
Another Bay Area Mustachian chiming in to say Do Not Do This.

Edited to Ask: When was that book published? Seems like outdated, simplistic advice.
« Last Edit: November 21, 2016, 08:17:33 AM by Diane C »


  • Walrus Stache
  • *******
  • Posts: 6968
  • Location: BC
Re: 10 / 10 / 10 rule?
« Reply #7 on: November 21, 2016, 02:25:32 PM »
I think your 10/10/10 rule is out of date. (the last 10 has been changed to something else with a "10" in it, I think?)

Check this out.  John Shaub has updated it, and here is a review..