953: Is the 1% Rule Dead? + Why Building (NOT Buying) Could Make You More

BiggerPockets Real Estate Podcast

BiggerPockets

Education, Investing, Business

4.8 • 16.6K Ratings

🗓️ 14 May 2024

⏱️ 44 minutes

🔗️ Recording | iTunes | RSS

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Summary

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 With high home prices and lagging rent growth, this once foolproof metric could be an outdated calculation inexperienced real estate investors should avoid.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! In This Episode We Cover The 1% rule explained and when you should (and definitely shouldn’t) use it to decide on deals Building new construction vs. flipping houses, plus which could make you more in 2024 Turnkey real estate investing and whether the lost value-add potential is worth the passive income HELOCs (home equity lines of credit) vs. DSCR (debt service coverage ratio) loans Best tools to use and metrics to track when looking into out-of-state investing markets And So Much More! (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! Check out more resources from this show on BiggerPockets.com and https://www.biggerpockets.com/blog/real-estate-953 Interested in learning more about today’s sponsors or becoming a BiggerPockets partner yourself? Email advertise@biggerpockets.com. Learn more about your ad choices. Visit megaphone.fm/adchoices

Transcript

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0:00.0	Should investors consider building a new home versus renovating an existing one?
0:05.0	Does the 1% rule even exist anymore?
0:08.0	What is the best way to fund a new investment, a DSCR loan or a Heelock.
0:13.4	This and so much more on today's episode. Hey everyone. I'm your host Dave Meyer and with me are two very seasoned
0:25.3	investors from the BiggerPockets universe, James Dainard, and Kathy Fecky
0:30.2	and today we're going to answer your listener questions.
0:33.0	Our team went through the BiggerPockets Forum
0:35.0	and pulled some of the most interesting thought-provoking conversation starters
0:40.0	and James Kathy and I are going to dive into them
0:42.0	and debate them today, and I think you're all going to dive into them and debate them today.
0:43.4	And I think you're all going to learn a lot.
0:45.4	So let's jump in.
0:47.2	All right, so our first question from the community
0:49.7	is, does the 1% rule exist anymore? Is this how I should still be thinking about my investments?
0:58.2	Kathy, I already see you smirking, so jump in on this one first.
1:03.0	I want to say it's a bit of a unicorn.
1:04.8	So you can definitely search for it.
1:07.0	You might find it.
1:07.8	It's harder.
1:09.2	Three quarter percent rule is probably what you need to be focused on right now.
1:13.7	Just last year, you know, we had our single family rental fund.
1:18.3	We were buying in the North Texas area and we were, almost every property we got was 1% because we got them so
	...

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