The Problem with the 1% Rule and When to Build vs. Buy Real Estate

The Problem with the 1% Rule and When to Build vs. Buy Real Estate

Episode #953

Could building houses make you more money than buying existing ones? When should someone use the 1% rule in real estate, and when does this metric point to a cash flow disaster? What’s the best way to get more capital or funding for future real estate deals: get a HELOC on your primary residence or look for investor-only DSCR loans? We’re pulling some of the top questions from the BiggerPockets Forums and giving our answers on today’s show!

Expert investors Dave Meyer, James Dainard, and Kathy Fettke from the BiggerPockets “On the Market” podcast are on today to answer YOUR real estate investing questions. First, we return to the age-old debate, “Does the 1% rule exist anymore?” With high home prices and lagging rent growth, this once foolproof metric could be an outdated calculation inexperienced real estate investors should avoid. Next, can you make more money building houses than flipping houses?

Are turnkey rentals the best “low headache” real estate investment? We’ll answer that and give our thoughts on when to use a HELOC (home equity line of credit) vs. a DSCR loan (debt service coverage ratio). Finally, for our out-of-state investors, we share the top metrics to look at BEFORE you invest in a new market.

Want to ask a real estate investing question? Post yours in the BiggerPockets Forums, and we might select it for our next show: https://www.biggerpockets.com/forums?utm_source=owned_media

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Hear Dave, James, and Kathy on the “On The Market” Podcast:
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1% Rule In Real Estate: What It Is And How It Works:
https://www.biggerpockets.com/blog/1-percent-rule-in-real-estate?utm_source=youtube&utm_medium=description&utm_campaign=none
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Is it Better to Build New or Renovate Existing Homes as an Investor?
https://www.biggerpockets.com/blog/build-buy-renovate?utm_source=youtube&utm_medium=description&utm_campaign=none
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Connect with Dave and Our Panel of Expert Guests:
Dave Meyer: https://www.biggerpockets.com/users/davem27?utm_source=youtube&utm_medium=description&utm_campaign=none
James Dainard: https://www.biggerpockets.com/users/jdainflips?utm_source=youtube&utm_medium=description&utm_campaign=none
Kathy Fettke: https://www.biggerpockets.com/users/kfettke?utm_source=youtube&utm_medium=description&utm_campaign=none
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Follow Dave and Our Guests on Instagram:
Dave: @thedatadeli or https://www.instagram.com/thedatadeli/
James: @jdainflips or https://www.instagram.com/jdainflips/
Kathy: @kathyfettke or https://www.instagram.com/kathyfettke/
BiggerPockets: @biggerpockets or https://www.instagram.com/biggerpockets/

Show notes at: https://link.chtbl.com/BPRE

00:00 Intro

00:46 Is the 1% Rule Dead?

08:24 Building vs. Flipping Houses

14:30 Are Turnkey Rentals Worth It?

20:56 HELOCs vs. DSCR Loans

25:07 Local Market Metrics to Track

30:46 Ask Us Your Question!


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