Real Estate Investing Rules You MUST Know (The 2%, 50% & 70% Rules)

What do you think about these rules? Let us know below!

I’m sorry but the 2% rule seems absurd. You’re telling me if I purchase a home for $200,000 I will need to shoot for 2% rental ($4,000) a month. Even at 1% it still seems unreasonable?

I used the 1% rule to buy my property in Alaska. Here properties don’t exist at 2% and 1% is really good. I got mine at 1.4%. I will make it up with higher appreciation though!

I feel like the 2% rule can’t be achieved anymore with home prices these days. Average price of a home in London Ontario is around 500k..nobody would pay close to 10k/month in rent lol

For newbies, be aware that this is a grossly oversimplified scenario. For one thing, you can't get a mortgage on an investment property without at least 25% down payment. Two, it's easy to see comps for house purchase prices, but it takes a lot of research to understand the comps on rent prices. The trick is to find a place where renting is more expensive than buying, but those places are less common because of this very type of scenario. Three, you have to remember that rent number he's using is supposed to be net income, not gross. So you have to think about costs for taxes, insurance, maintenance and vacancy when you're researching investments. All that said, real estate investing is a good tool for wealth accumulation. But it isn't foolproof.

Early saving and investing money creates compounds growth, it's a beautiful thing.But it takes focus and discipline. You need to be focused enough to commit to a plan and a process.

My time is valuable. I love that you get right down to the practical information without any fluff. You get right down to business which values my time, and makes me an instant subscriber! Great videos!

the amount of time we spend believing we can't is more thank enough time to learn how you can.

I’ll call mine the 0.8%-1% rule. Put me in several very comfortable cash flow and equity situations.

The 2% rule is nuts. If you expect to buy a $250,000 property and rent it for $5,000, you're on drugs. Most cities in the US the rent for a nice 4 bed 2 bath house is $2 to $3K. Purchase price is going to be $250K to $400K for a standard middle of the road house. Even a fixer-upper is going to be $1O0,000 to $200,000 and you'll put $50K or more in repairs, and you'll be lucky to get $1,500 month rent. That gives you a 0.5% to 1.0% monthly return, rather than the 24% annual return your 2% rule gives you.

The 1% or 2% rule can be used to figure out if an area is generally overpriced or a seller’s market. Boston or DC are such. I lived in a house worth 750k that rented for 2k a month. Boston market is more of a buy and hold on appreciation type of investment. Most of the properties that give 1.25-2% are not attractive for appreciation purposes 5-7 years down the road.

I have never seen a 2% deal in my life but I have seen a few close to 1%.

1- find the positive percentage flow. Rent÷value. The higher, the better 2- half of income goes to expenses 3- find ur mortgage and profit and cash flow

The 2% isn’t a possibility anymore. You’d be lucky to maybe get 0.5%.

I think these rules mostly apply to low priced areas. Popular coastal areas with large populations and great jobs such as Seattle, San Francisico, Los Angeles, etc. are practically impossible to find 1% rule houses much less 2%. However, those low priced areas do not appreciate much, but the coastal area big job centers do - so what you don't make in cashflow, you do make up and then some in appreciation. Those better areas also tend to have better tenants and less turnover and damage. So the take these rules of thumb with a grain of salt.

I'd like to see the $100k house generating $2k/mo. rent. Is it in Fantasyland? How do you get there?

Oh my goodness! I'm so glad you guys are covering slang. You guys should do a series on just slang and terms

Thank you sir. Your videos are extremely helpful especially in my learning stage. I appreciate all that you guys do.

As per the 2% rule , we are not able to find any properties in this market. Even 1% is difficult to find. What modification will you suggest in this? Or should we not buy in this market?

Thanks for the videos and for “BIGGER POCKETS” !!!!! Brandon you’re a Blessing.