making cash flow even/positive

Monthly rental income >= P.I.T.I.H.

My break-even point is *even* cash flow. The way I see it is that I can own a sharply discounted properties with nearly 100% bank financing. The rental income is even with P.I.T.I.H (principal, interest, tax, insurance and HOA fee). My cost is literally zero in owning this property. Over the long term, the principal will slowly get paid down. Rent will rise (that’s a certainty in high-inflation period). And eventually, price will rise. Even if I make no or very small monthly cash income, my long term benefit will be huge.

REOs with over-corrected pricing are located in working class or lower income neigbhorhoods. They are not necessarily crime-ridden or dilapidated areas. Before the subprime crisis, these places used to have median prices around 300K range. Now, banks put up fire-sales and depressed prices to 100K and below. We are presented with a rare profit opportunity that only shows up in a very special condition in history. I bet this opportunity may disappear in 12-24 months. To put it simply, the general market has not bottomed, but some over-corrected REO properties have hit bottom. For example, one property I am buying has the same asking price as that recorded in 1986 transaction from county tax record. All these billions of dollars of loss that banks are writing off are actually being realized from these fire-sales. Banks lose, you gain!

For those > 1% rule, are they good investment?

All I can say is this, they are *uncertain* investments. Some may be good for the long term if future appreciation is taken account of. However, one disadvantage is that you have to put down xx% of downpayment to fill the unbalanced cash flow. For example, to bring a 400K house cash flow balanced, you have to put down 150K as down payment. Because this 400K house can only generate $2500/month in rental income, its 1%-rule-value should be 250K (2500/1%), not 400K. The second disadvantage is that you may not know if that community may get more foreclosures and futher pull down the price from 400K, by this time next year it could drop to 300K.