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Should You Rely On The 1% Rule to Strike a Good Deal in Investment Property Across Los Angeles?

If you have been in real estate and property investments for a while, chances are you must have come across this 1 percent rule. Investment property in Los Angeles is one of the most lucrative money-making financial tools for investors and buyers. As the country’s second-largest city, its fantastic climate, flourishing job market, and exceptional diversity make it a hot spot for tenants, job seekers, and people looking to experience the LA dream life. 

To give a short brief, the one percent rule refers to a measurement standard set up as a mark by investors to gauge the lucrativeness of a property. It measures the property price against the gross it will generate. For a place to clear the one percent rule, its monthly rent must match 1 percent of its purchase price.

To explain it with an example, if a property costs you $150,000 in the purchase, as per one percent rule-

150, 000 X 0.01= $1,500 (which should be the rent charged by you)

In case the property has repairs for say $10,000, then-

($150, 000+ 10, 000) X 0.01= $1,600

Any property, that is able to achieve the above rent to purchase price ratio, is majorly favored as a “good deal” by investors looking for immediate positive cash flow.

Undoubtedly, one percent is a great prescreening tool. It works as an excellent filter to sift bad investments and streamline options. Of course, for a better location or a better quality building, investor usually expect a smaller rent to purchase price ratio, since investor anticipate better future value growth and less maintenance cost.

In today’s market, it is extremely difficult to achieve the one percent rule anywhere in Los Angeles. However, it is not impossible. With our expertise in property management and building maintenance, we can help investor to achieve the goal in a short period of time by implementing a good step-by-step strategy.

THE VERDICT

If you would like more help to assist your purchase of a good investment property across the Los Angeles market to strike a good deal, connect with us today!

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