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Posted about 10 years ago

My take on the 2% rule, and the controversy

Is the 2% rule valid for your market? Yes, and no. And also, who cares. What really matters is being aware of what a good deal is in your market, and knowing where and how to find the good deals. 

If you can make a decent profit from a deal that only meets the 1% rule, who cares if it meets the 2% rule. Or, if you are comfortable with buying based on appreciation play, then by all means do so. 

I think the biggest two mistakes new investors seem to make is to take the 2% rule too literally, and to discard it too casually because someone else says it doesn't work. Both are dangerous and or detrimental to solid investment. You need to know what constitutes a good deal, no matter what parameters you are using.  

Is a deal that meets the 2% rule always a good deal, anyway? No, absolutely not. Just because you can rent that $20K house for $750/month does not mean it is a good deal. If you have to risk your life to go collect rent from a crack head, that is not a good deal in my opinion. And just because you can only make $1,000/month on that nice $100K property doesn't mean it is a bad deal. It is all a matter of understanding ALL of the factors involved.

So what is the answer? BiggerPockets, of course. Read, listen to podcasts, participate in the forums and learn what works, and how to make it work. Good luck!


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