Is the 2% rule good enough for you?

Hello fellow BP friends, I have read many discussions on here about the 2% rule. To my advantage, I have been finding deals that exceed the 2% rule. I am about to close on a house that turns out to roughly be 2.7% turn-key rentable. These are not war zones, I feel very comfortable going into this neighborhood and walking around. It feels weird to me now to say "hey the 2% rule is not good enough" when that seems to be the rule of thumb for pre-qualifying (on paper) a property. What are you guys accepting and finding in your areas??

Jonathan Sher

Residential Landlord · Saint Louis, Missouri

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Aug 02 '11, 09:12 AM

Excuse my use of the wrong sub-forum...

Mitch Kronowit

SFR Investor · Orange County, California

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Aug 02 '11, 09:33 AM

Originally posted by Jonathan Sher

I have been finding deals that exceed the 2% rule. I am about to close on a house that turns out to roughly be 2.7% turn-key rentable.

Where? Is this a $100,000 house renting for $2,700 or a $20,000 house renting for $540?

Joshua Dorkin

BiggerPockets Founder · Denver, Colorado

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Aug 02 '11, 09:37 AM

Jonathan - I'd be more than happy with a 2% deal and ecstatic with a 2.7% one. I'm sure you're going to keep your market close to the hip, though, aren't you. :wink:

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Jonathan Sher

Residential Landlord · Saint Louis, Missouri

108 posts
3 awards
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Aug 02 '11, 09:51 AM

Originally posted by Mitch Kronowit

Originally posted by Jonathan Sher
I have been finding deals that exceed the 2% rule. I am about to close on a house that turns out to roughly be 2.7% turn-key rentable.

Where? Is this a $100,000 house renting for $2,700 or a $20,000 house renting for $540?

Mitch, The houses I come across are typically in the 25K-40K range. For example this SFR I am buying is for $29,500 and rent in the area is around $800 a month. It's crazy to think that this house sold for $99,000 in 2006 (Year I know its the past).

Jonathan Sher

Residential Landlord · Saint Louis, Missouri

108 posts
3 awards
52 influence

Aug 02 '11, 09:53 AM

Originally posted by Joshua Dorkin

Jonathan - I'd be more than happy with a 2% deal and ecstatic with a 2.7% one. I'm sure you're going to keep your market close to the hip, though, aren't you. :wink:

Haha thanks Josh, I'll just say that I don't venture that far out of my state. Thanks for changing the sub-forum for this post.

Joshua Dorkin

BiggerPockets Founder · Denver, Colorado

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Aug 02 '11, 09:56 AM

Sure thing. . . . not a problem

Jonathan Sher

Residential Landlord · Saint Louis, Missouri

108 posts
3 awards
52 influence

Aug 02 '11, 10:06 AM

ahhh, Trying to post a pic, thought I figured it out...obviously not

admin edit: fixed pic

Edited: 08/05/2011 at 06:12AM by Administrator

Mitch Kronowit

SFR Investor · Orange County, California

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Aug 02 '11, 10:28 AM

Originally posted by Jonathan Sher

For example this SFR I am buying is for $29,500 and rent in the area is around $800 a month.

Wow. $30k might get me a mobile home in my area. Getting $800/month in rent requires paying around $75k in some of the outlying areas (boondocks).

Ryan B.

Real Estate Investor · -, Illinois

269 posts
5 awards
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Aug 02 '11, 11:26 AM

Right now I can pull right around 2.2% and stay out of the war zones with my $27k rental that is strictly for cashflow. I also play devil's advocate by having a rental at 1% but it is an appreciation play in an upscale town.

Edited: 08/02/2011 at 11:40AM by Ryan B.

Kevin C.

Real Estate Investor · North of Dallas, Texas

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Aug 02 '11, 12:17 PM

Originally posted by Jonathan Sher

[img]http://www.biggerpockets.com/photos/show/169025[/img]

ahhh, Trying to post a pic, thought I figured it out...obviously not

Would that house be in the St Ann area?

Jonathan Sher

Residential Landlord · Saint Louis, Missouri

108 posts
3 awards
52 influence

Aug 02 '11, 12:17 PM

Originally posted by Jonathan Sher

[img]http://www.biggerpockets.com/photos/show/169025[/img]

ahhh, Trying to post a pic, thought I figured it out...obviously not

Can someone shed some light on posting pics? did I quote it right above?

Jonathan Sher

Residential Landlord · Saint Louis, Missouri

108 posts
3 awards
52 influence

Aug 02 '11, 12:18 PM

Originally posted by Kevin C.

Originally posted by Jonathan Sher
[img]http://www.biggerpockets.com/photos/show/169025[/img]

ahhh, Trying to post a pic, thought I figured it out...obviously not

Would that house be in the St Ann area?

Ferguson, a litte east of St. Ann. There are some nice parts of St. Ann, I'm always on the look out for deals there

Steve Babiak

Real Estate Investor · Audubon, Pennsylvania

4,267 posts
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Aug 02 '11, 12:44 PM

how to post a picture:
http://www.biggerpockets.com/forums/25/topics/45114-how-to-post-a-picture-

Rich Schroeder

Real Estate Investor · Wisconsin

452 posts
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Aug 02 '11, 01:15 PM

I am routinely finding 3% deals. It's great, but I had to make some tough choices to get here. I had to pick up my life and family and move. Looking back, it was a great move. I love the area in which I live and it's close enough to my investing area to make it relatively easy to work on. In todays market, I would not even recommend doing 2% deals. Or at least I would make that my minimum requirement.

Ryan B.

Real Estate Investor · -, Illinois

269 posts
5 awards
56 influence

Aug 02 '11, 01:21 PM

Originally posted by Rich Schroeder

I am routinely finding 3% deals.......

Good lord, look out Rich I'm headed north. :D

Jonathan Sher

Residential Landlord · Saint Louis, Missouri

108 posts
3 awards
52 influence

Aug 02 '11, 01:31 PM

woohoo! finally got the picture to work. He is the house I am closing on this week. This is from google street view, so yes, the picture is funny looking by the window.