The 1% rule can be used to narrow the scope of your search. I use it as a base level perimeter when helping investors. The difficulty is the same as using a Gross Rent Multiplier - it deal in gross income. In Texas our property taxes are higher than majority of other markets. The 1% generalization may make sense when property taxes are 1.05% as in St. Louis, MO, but might no the make sense in a part of Houston where the tax rate is 2.9%.\n\nNet Oporating Income (NOI) is important to know or estimate - Net Operating Income = Gross Income - Opporating Expenses. Gross Income is the income a property produces (or is projected to produce as in a proforma). Opporating Expenses are all reasonable costs associated with the property like vacancy, utilities, management, taxes, etc... but not debt service. (Please research the complete definition.)\n\nKnowing the intention of your investment is also key. Some investors want cash flow while others are interested in appreciation. It is common for a property to have strength in one or the other of these. In a property with high cash flow (monthly income) it is less likely to have strong appreciate long term. Conversely, properties with potential for strong appreciation often do not cash flow. Knowing what is important to you and on what you might compromise is key. \n\nIdeally one would find a property with enough cash flow to cover costs, but still with a better that average appreciation. Ultimately, working with an agent who has experience is a good start. Educate yourself on the areas you and an agent decide have potential. Have your agent construct a search that reteurns properties might work and study the market. The more educated you can become about your chosen subject the more comfortable you can be when you see an investment that might work. Strong investment sell quickly so confidence in one\'s knowledge is essential in making an astute investment. Build a relationship with someone you trust and stay informed!