2% rule of thumb

[Jeff Owens]

I'm in the San Francisco area. Prices are to high for me so I'm looking one hour away. Like in Tracy CA. I still can't wrap my head around the 2% of sell price should be what you get for your monthly rent. I'm finding things in the 260k range but only getting $1480 rent per month. Any help?

[Ned Carey]

The 2% rule is a form of Gross Rent Multiplier. GRM is one of the crudest forms of evaluating a deal. It is generally a quick screening tool.

Also it is VERY important to note that the 2% number can vary based on your personal situation and investing goals. To some degree also the current market. It is important to run the numbers to find out what kind of GRM works for you. 2% is generally a very safe number and would keep newbies out of trouble. Once you understand the numbers you can adjust for yourself

I know there are better deals out there than that. You need to learn how to find them. there are plenty of threads here on finding deals. There is a BP blog post about 100 ways to find deals.