--- title: "The 1% Rule Lies: A Fourplex That Still Failed | Addicted to ROI" description: "A real fourplex met the 1% rule and still didn't pencil. How to verify rent comps, read building systems from photos, and underwrite past the screen." lang: en json-ld: | [ { "@context": "https://schema.org", "@type": "Organization", "@id": "https://addictedtoroi.com/#organization", "name": "Addicted to ROI", "url": "https://addictedtoroi.com", "logo": { "@type": "ImageObject", "url": "https://addictedtoroi.com/images/logo.png" }, "description": "Live your best life funded by your investments. Real estate, taxes, travel, and business, by Jennifer Beadles.", "founder": { "@id": "https://addictedtoroi.com/#jennifer" }, "sameAs": [ "https://agentsinvest.com", "https://doorprofit.com", "https://repstime.com", "https://strhours.com", "https://kidspayroll.com", "https://rentstager.com" ] }, { "@context": "https://schema.org", "@type": "WebSite", "@id": "https://addictedtoroi.com/#website", "url": "https://addictedtoroi.com", "name": "Addicted to ROI", "publisher": { "@id": "https://addictedtoroi.com/#organization" }, "potentialAction": { "@type": "SearchAction", "target": { "@type": "EntryPoint", "urlTemplate": "https://addictedtoroi.com/blog/?q={search_term_string}" }, "query-input": "required name=search_term_string" } }, { "@context": "https://schema.org", "@type": "Person", "@id": "https://addictedtoroi.com/#jennifer", "name": "Jennifer Beadles", "url": "https://addictedtoroi.com/about/", "jobTitle": "Founder, Addicted to ROI", "description": "Real estate investor and founder of Addicted to ROI. Built an 8-figure rental portfolio across multiple states and teaches everyday investors how to build passive income.", "worksFor": { "@id": "https://addictedtoroi.com/#organization" }, "sameAs": [ "https://agentsinvest.com", "https://doorprofit.com", "https://repstime.com", "https://strhours.com", "https://kidspayroll.com", "https://rentstager.com" ] }, { "@context": "https://schema.org", "@type": "Article", "mainEntityOfPage": { "@type": "WebPage", "@id": "https://addictedtoroi.com/blog/1-percent-rule-real-estate/" }, "headline": "The 1% Rule Lies: A Fourplex That Passed and Still Failed", "description": "A real fourplex met the 1% rule and still didn't pencil. How to verify rent comps, read building systems from photos, and underwrite past the screen.", "image": "https://images.unsplash.com/photo-1560518883-ce09059eeffa?w=800&q=80", "datePublished": "2026-07-08", "dateModified": "2026-07-08", "author": { "@id": "https://addictedtoroi.com/#jennifer" }, "publisher": { "@id": "https://addictedtoroi.com/#organization" }, "speakable": { "@type": "SpeakableSpecification", "cssSelector": [ ".tldr-answer", "h1" ] } }, { "@context": "https://schema.org", "@type": "BreadcrumbList", "itemListElement": [ { "@type": "ListItem", "position": 1, "name": "Home", "item": "https://addictedtoroi.com" }, { "@type": "ListItem", "position": 2, "name": "Blog", "item": "https://addictedtoroi.com/blog" }, { "@type": "ListItem", "position": 3, "name": "Deal Analysis", "item": "https://addictedtoroi.com/blog?category=deal-analysis" }, { "@type": "ListItem", "position": 4, "name": "The 1% Rule Lies: A Fourplex That Passed and Still Failed", "item": "https://addictedtoroi.com/blog/1-percent-rule-real-estate/" } ] }, { "@context": "https://schema.org", "@type": "FAQPage", "mainEntity": [ { "@type": "Question", "name": "Is the 1% rule still useful in real estate investing?", "acceptedAnswer": { "@type": "Answer", "text": "As a screening filter, yes. It tells you which listings deserve a real analysis. It fails as a buying criterion because it ignores taxes, utilities, insurance, vacancy, and whether the advertised rent is achievable." } }, { "@type": "Question", "name": "How do I verify rent comps on a rental property?", "acceptedAnswer": { "@type": "Answer", "text": "Use three sources: a rent data tool for the baseline, Zillow filtered to exact bedroom matches (checking days on market on each comp), and a local property manager's opinion. If the deal only pencils at a rent no source supports, pass." } }, { "@type": "Question", "name": "What does it mean if a multifamily building has radiators?", "acceptedAnswer": { "@type": "Answer", "text": "Radiators usually mean a central boiler: one heating system for the whole building, with the owner paying the heat bill. Budget accordingly, and prefer buildings where units have independent, tenant-paid heat." } } ] } ] --- [![Addicted to ROI](/images/logo.png)](/) [Travel](/pillars/travel/)[Real Estate](/pillars/real-estate/)[Tax Savings](/pillars/tax-savings/)[Business](/pillars/business/)[Paths](/paths/)[Blog](/blog/)[Tools](/tools/)[Apps](/software/)[About](/about/) [Login](https://members.addictedtoroi.com/) Subscribe [Travel](/pillars/travel/)[Real Estate](/pillars/real-estate/)[Tax Savings](/pillars/tax-savings/)[Business](/pillars/business/)[Paths](/paths/)[Blog](/blog/)[Tools](/tools/)[Apps](/software/)[About](/about/)[Login](https://members.addictedtoroi.com/) Contents 1. [01 The deal on paper ](#the-deal-on-paper) 2. [02 Step one: verify the rent claim ](#step-one-verify-the-rent-claim) 3. [03 Step two: read the building from the photos ](#step-two-read-the-building-from-the-photos) 4. [04 Step three: run the real numbers ](#step-three-run-the-real-numbers) 5. [05 Why the rule fails ](#why-the-rule-fails) [Home](/)/ [Blog](/blog/)/ [Real Estate](/pillars/real-estate/) Deal Analysis # The 1% Rule Lies: A Fourplex That Passed and Still Failed A real fourplex met the 1% rule and still didn't pencil. Here's how to verify rent comps, read building systems from the listing photos, and underwrite past the screen. July 8, 2026 7 min read Contents 1. [01\. The deal on paper](#the-deal-on-paper) 2. [02\. Step one: verify the rent claim](#step-one-verify-the-rent-claim) 3. [03\. Step two: read the building from the photos](#step-two-read-the-building-from-the-photos) 4. [04\. Step three: run the real numbers](#step-three-run-the-real-numbers) 5. [05\. Why the rule fails](#why-the-rule-fails) tl;dr A Cincinnati fourplex grossed over 1.2% of its price and still didn't pencil. The 1% rule only sees price and gross rent, so it misses owner-paid utilities, property taxes, vacancy, and rents that aren't real. Verify rents with three sources, read the building's systems from the photos, and run the full numbers before you offer. The 1% rule says a rental should gross monthly rent equal to at least 1% of its purchase price. It's a decent screen. It is not underwriting, and treating it like underwriting will buy you a bad building. On one of our Deal Analysis calls, a member brought a fourplex that shows exactly how the rule lies. We ran it live, and it's worth walking through, because the failure points are the ones that kill deals everywhere. ## The deal on paper Off-market fourplex in Cincinnati, four 1-bed/1-bath units, 1940s vintage, asking $330K with a suggested offer around $310K. The agent's pitch: potential rent of $995 per unit, or about $4,000 a month. $4,000 on $330K is over 1.2%. Passes the rule with room to spare. Green light, right? ## Step one: verify the rent claim Current average rents in the building were $725. The $995 was somebody's proforma, and a proforma is a hope with formatting. Here's the rent comp workflow I use every time: 1. Start with a data tool for the neighborhood baseline. I use [DoorProfit](https://doorprofit.com), which suggested around $650 for comparable units. 2. Cross-check on Zillow. Filter to for-rent, apartments, exact bedroom match. The comps came back at $695, $775, $850, and $895. A $925 unit had been sitting 16 days, and a $995 unit had been sitting 62 days. Days on market matters: a stale listing isn't a comp, it's a warning. 3. Confirm with a property manager. The only thing that would have saved this deal is a local PM confidently supporting $995. I doubted it, and that's exactly the phone call to make before writing an offer. Realistic answer: maybe $900 max. That alone knocks the "potential" income down 10%, but it gets worse. ## Step two: read the building from the photos Before you ever tour a small multifamily, listing photos tell you a lot about operating costs: - Radiators mean a central boiler. One heat source for the whole building, common in the Midwest. Not ideal: one tenant runs hot while another is cold, and the owner pays the heat. This building had it, roughly $5,400 a year in owner-paid utilities. - Ceiling ducts plus individual thermostats mean independent heat. Tenants pay their own. Baseboards, same story. - 1940s buildings aren't automatically bad. Watch for lead paint and old electrical, but if the electrical and plumbing are updated and the building is solid, it's not the end of the world. ## Step three: run the real numbers We re-ran the deal at $900 rents, a 6.75% rate, 8% vacancy, Ohio's healthy property taxes, and that $5,400 owner-paid heat bill. The insurance quote of $2,000 a year for a fourplex looked low to me too, which means the real numbers are worse than these. Result: roughly a 6 cap on proforma, below my 6.25 minimum ([my standard underwriting numbers are here](/blog/how-i-underwrite-rental-properties/)), thin-to-no cash flow. My verdict on the call: sadly, even at the 1% rule, this doesn't work. It's a good reminder of why I favor [2-to-4-unit properties](/blog/why-2-to-4-unit-properties-are-the-sweet-spot/) that actually pencil, not just ones that pass a screen. ## Why the rule fails The 1% rule only looks at price and gross rent. It cannot see: - Who pays utilities. A central boiler moves thousands a year from tenants to you. - Property taxes. The same rent-to-price ratio performs completely differently in a high-tax state. - Whether the rent number is even real. Agent proformas routinely run 10 to 30% above what comps support (this one claimed $995 against $725 actuals). - Vacancy, insurance, and the age of major systems. Use the rule to decide which deals earn 30 minutes of your attention. Then verify rents with three sources, read the systems, and run the full stack. The deeper version of that analysis is in [the fast and simple way to analyze multi-family deals](/blog/the-fast-and-simple-way-to-analyze-multi-family-deals/). If a deal only works on the listing agent's numbers, it doesn't work. _This article is for educational purposes only and is not tax, legal, or financial advice. Consult a qualified CPA or tax attorney about your specific situation._ Addicted to ROI is education and community, not financial or tax advice. Talk to a qualified professional before making investment or tax decisions. ![Jennifer Beadles](/images/founders.jpg) Jennifer Beadles Real estate entrepreneur with 17 years of hands-on investing experience. Built an 8-figure rental portfolio across multiple states and has helped thousands of investors build passive income through the Addicted to ROI community. The tool that goes with this ## The software that does this for you [ Deal analysis DoorProfit Type in a price and watch cash flow, cash-on-cash, cap rate and NOI move in real time, then save, compare and share underwriting across your whole pipeline. Analyze a deal ↗ ](https://doorprofit.com)[ Agent match Agents Invest Tell us the market and the strategy, and we match you with a vetted, investor-friendly agent who knows how to run a rental analysis, not just sell you a house. Match me with an agent ↗ ](https://agentsinvest.com) Before you close the tab ## Get the next one in your inbox. One email per new article, the day it goes up. No wall, no spam, unsubscribe in a click. [Subscribe, free →](/newsletter/)[Run a deal in the calculator](/tools/deal-analysis-calculator/) Read next [ ![How to Renovate a Rental You've Never Seen in Person](https://images.unsplash.com/photo-1581578731548-c64695cc6952?w=800&q=80) Investment Strategies ### How to Renovate a Rental You've Never Seen in Person 10 min read → ](/blog/renovate-out-of-state/)[ ![How to Determine Fair Market Rent in a Market You Don't Live In](https://images.unsplash.com/photo-1554469384-e58fac16e23a?w=800&q=80) Deal Analysis ### How to Determine Fair Market Rent in a Market You Don't Live In 8 min read → ](/blog/fair-market-rent/)[ ![The Questions to Ask Before You Buy in a Market You Don't Live In](https://images.unsplash.com/photo-1423666639041-f56000c27a9a?w=800&q=80) Due Diligence ### The Questions to Ask Before You Buy in a Market You Don't Live In 9 min read → ](/blog/market-call-questions/) If you like this ## Read these next Hand-picked to go deeper on real estate. [![How to Renovate a Rental You've Never Seen in Person](https://images.unsplash.com/photo-1581578731548-c64695cc6952?w=800&q=80) Real Estate ### How to Renovate a Rental You've Never Seen in Person 10 min read](/blog/renovate-out-of-state/) [![How to Determine Fair Market Rent in a Market You Don't Live In](https://images.unsplash.com/photo-1554469384-e58fac16e23a?w=800&q=80) Real Estate ### How to Determine Fair Market Rent in a Market You Don't Live In 8 min read](/blog/fair-market-rent/) [![The Questions to Ask Before You Buy in a Market You Don't Live In](https://images.unsplash.com/photo-1423666639041-f56000c27a9a?w=800&q=80) Real Estate ### The Questions to Ask Before You Buy in a Market You Don't Live In 9 min read](/blog/market-call-questions/) [![How to Invest Out of State Without Getting Burned (The One Trap)](https://images.unsplash.com/photo-1500382017468-9049fed747ef?w=800&q=80) Real Estate ### How to Invest Out of State Without Getting Burned (The One Trap) 8 min read ](/blog/invest-out-of-state/) Off to go build something. 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