Welcome to passive real estate investing, the show where busy people like you learn how to build substantial passive income while creating wealth for the long term.

And now here's your host, Marco Santorelli.

Hello, my friends, and welcome to another episode of Ask Marco,

where I answer your investing related questions.

So today we get a question coming in from Dave and it is related to the Ask Marko episode I did last week about the rent to value ratio.

And this one is actually a little bit more specific because he's referring to it as the 1% rule which a lot of people refer to it as

And he says hi Marco I've been a fan of your podcast for years now you provide great investing insight and knowledge in a trustful

non-objective manner thank you for that as you being in the turnkey business can you

explain why the 1% rule seems to be the baseline in the rent to value ratio.

Sometimes it's a little over and under but usually close.

When looking at the turnkey listing, nine times out of 10,

I can guess the rent based on the asking price which is close to 1%.

Do turnkey providers typically mark up the price to hit the 1% mark?

Thanks Dave.

Okay great question.

So as you can see, this question is very closely related to the topic we had last week about

the rent-value ratio because the 1% rule is about the rent value ratio and as I mentioned last week generally speaking

we want a target of about 1%. It can go as low as about 0.8% and as high as 1.1% when you're outside of that

range you have to start asking some pretty important questions such as where is it located more

specifically what type of neighborhood is it in if it's on the outside of a

range being in the upper a class neighborhoods or the lower seas and below, it's going to skew that

rent-to-value ratio just naturally because of its location and how the purchase price in those areas relate to the typical or average rent in those areas.

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