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Seth Jones spent nearly a decade building a 10-property real estate portfolio across Florida and South Carolina. He sold every one of them.
Jones, a former mortgage broker in Port Orange, Florida, followed a simple but strict rule: if a property couldn’t rent for at least 1% of its purchase price each month, it wasn’t worth buying.
“It’s very simple, back-of-the-napkin math,” Jones, 36, told Business Insider. “On a $100,000 property, am I able to rent it out for $1,000 per month? On a $200,000 property, am I able to rent it out for $2,000 per month?”
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He and his wife lived extremely frugally, relying solely on her teacher’s salary while using all of his income to save for properties. “We hardly ever ate out and never went to bars,” Jones said.
After starting with two small homes in 2014, he gradually expanded. By 2019, he owned higher-quality properties in strong school districts, including one out-of-state investment in Lexington, South Carolina, purchased for $138,000.
But as the COVID-era housing boom began, Jones started to feel uneasy. “I watched things take off,” he told Business Insider. “The fundamentals started to change.”
He noticed the industry shift away from cash flow toward speculation and appreciation. That didn’t sit right with him.
“That’s just never how I’ve looked at underwriting deals,” he said.
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Between 2019 and 2023, Jones sold all 10 properties. One of them, purchased for $190,000, sold for $500,000. Instead of buying more real estate, he moved everything into a diversified exchange-traded-fund portfolio that includes stocks, gold, and both short- and long-term treasuries.
“I have no regrets,” Jones said. “I think I’ll be vindicated once we have some type of correction.”
Not everyone agrees with his decision. “I have people who tell me I’m an idiot for selling off my properties,” he told Business Insider. “They think they could’ve made 10 times what I did.”
Even so, Jones said the relief has been worth it. “From a liability perspective, I have no external worries. No one’s going to get hurt. I’m not dealing with late-night phone calls.”
He added that while there is still stress in stock investing, life is “way simpler” now.
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The 1% rule isn’t perfect, but it’s a common starting point for real estate investors. If monthly rent meets or exceeds 1% of a property’s purchase plus rehab cost, it’s often seen as having the potential for positive cash flow.
For example, if a home costs $170,000 total, an investor should be able to rent it for at least $1,700 per month to meet the rule. While easy to calculate, it doesn’t account for factors like mortgage rates, homeowners association fees, or maintenance costs.
Other methods, like the 2% rule or the 50% rule, which reserves half of rental income for expenses, offer different perspectives. But for Jones, the 1% rule offered the clarity and discipline he needed to make confident decisions.
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This article He Walked Away From 10 Booming Properties At The Peak Of The Market. ‘People Tell Me I’m An Idiot,’ Says The Real Estate Investor originally appeared on Benzinga.com