2% rule is bull

Buying & Selling Real Estate
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2% rule is bull

Martin S.
Brooklyn, NY · Member since 2014 · 174 posts · 23 votes

I cant find a single property that I would be able to buy in a half decent neighborhood utilizing the 2% rule. I looked in almost all of florida. Maybe a trailer park home, but then again, the land rental fee or whatever will kill any positive cash flow...

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Account Closed
Homeowner · Pittsburgh, PA · Member since 2014 · 854 posts · 511 votes
11y
Originally posted by @Martin S.:

Stop with the stupid pictures too... So far I haven't seen a single address or Zillow link...

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  • Account Closed
    Homeowner · Pittsburgh, PA · Member since 2014 · 854 posts · 511 votes
    11y

    @Martin S. 

    Against my better judgment, I am going to share a 2% multi-unit property of mine.  You don't deserve to see it, but I am feeling generous at the moment.

    Multi-Unit 2%

    3Reply
  • Account Closed
    Homeowner · Pittsburgh, PA · Member since 2014 · 854 posts · 511 votes
    11y
    Originally posted by @Nancy Roth:

    Cardinal rule in online forums: Don't feed the troll. 

    I agree with @Mark Ferguson

    0Reply
  • Brandon Hall
    CPA · Raleigh, NC · Member since 2013 · 1k+ posts · 2k+ votes
    11y

    @Martin S. You said you looked in NC? Are you sure? My parents invest in NC and are hitting about 1.7%. I went to a specific town this past weekend and viewed several multi-family properties that pull 1.5% and with a bit of maintenance and TLC they'd pull closer to 2%.

    Not that hard bud. Get off your couch and step outside once in a while.  

    0Reply
  • Martin S.
    OP
    Brooklyn, NY · Member since 2014 · 174 posts · 23 votes
    11y

    Ok, I found a 2% house in Columbus, OH in an almost decent neighborhood which I still wouldn't live in. I would live in the North West part and this house is just borderline there more like mid west part... LoL

    I don't think I'd invest there though. Anyone have any convincing reason why I should drive or fly there and have a look, lol?

    0Reply
  • Account Closed
    Homeowner · Pittsburgh, PA · Member since 2014 · 854 posts · 511 votes
    11y
    Originally posted by @Martin S.:

    Ok, I found a 2% house in Columbus, OH in an almost decent neighborhood which I still wouldn't live in. I would live in the North West part and this house is just borderline there more like mid west part... LoL

    I don't think I'd invest there though. Anyone have any convincing reason why I should drive or fly there and have a look, lol?

    Seriously.  Are you capable of doing ANY of your OWN due diligence?

    0Reply
  • Martin S.
    OP
    Brooklyn, NY · Member since 2014 · 174 posts · 23 votes
    11y

    You wont find anything like that in NC, CT, PA or FL though.

    0Reply
  • Jeremy Davis
    Canal Winchester, OH · Member since 2014 · 151 posts · 55 votes
    11y

    @Martin S. and what is this address that you found i am curious 

    0Reply
  • Martin S.
    OP
    Brooklyn, NY · Member since 2014 · 174 posts · 23 votes
    11y

    http://www.zillow.com/homedetails/4308-Packard-Dr-Hilliard-OH-43026/33976146_zpid/

    0Reply
  • Jeremy Davis
    Canal Winchester, OH · Member since 2014 · 151 posts · 55 votes
    11y

    hahaha oh and if you found a house for sale for 38k in columbus you my friend are on the hilltop.... hilltop USA one of the worst parts of town!!!! [edited by moderator]

    1Reply
  • George N.
    Investor · Great Falls, MT · Member since 2014 · 163 posts · 132 votes
    11y

    First off, you're obnoxious and tactless so you've probably killed most chances for success right there. At the risk of feeding a troll...

    I have sometimes felt that BP is heavy on wholesaling/yellow letters etc. The frequent talk of 2% etc, made me trigger shy when I was starting out as well. However, by its nature this site will attract mostly active/high volume real estate investors, not someone who buys 3-4 properties and leaves them alone for 25 years. So that's natural.

    It's also important to keep in mind that it isn't 2009/2010 anymore. The market has rebounded so at this point in the RE cycle the numbers aren't that attractive overall.

    That said, the 1% and 2% rules are basically rough estimates of cap rate. a 2% property is going to mean a +/- 10 cap and a 1% probably about a 7. 10 caps are going to be tough to come by, even during bad times. But there entire asset classes where a 10 cap is the norm. I'm about to close on a mobile home park in the 10 cap range and I think I can value add on top of that. Most buyers and sellers use that 9-10 cap as a benchmark for MHPs. Would I live in one? No. And there's the other point.

    Your single-minded ignorant obsession with the need to want to live somewhere yourself to buy there is another problem you're having. I would only buy somewhere that I was willing to do business in and be comfortable working with. But I don't have to want to live there myself.

    So yes, people are buying 2% properties and houses. There are little houses in Indianapolis, Toledo, and other rust belt cities that you can probably get 2% for, even retail. And they won't be war-zones. But they will be older, need more maintenance, and appreciate much more slowly. So, wow, you're discovering there's a trade-off in a free-market economy. Higher returns require more risk/work. Lower returns are more passive and risky. I haven't seen anyone here claiming they're picking up high-rise NYC condos at 2%. But, unfortunately for you, you're making a fool of yourself as you come to this realization. You have an entitled attitude, you're obviously unwilling to listen/learn, and you let frustration turn you into a jerk. These are all the qualities of a failure/loser. I'd take a step back and re-evaluate myself if I were you. This is an incredible amount of information on this site related to every aspect and niche of REI. And amazingly, it's free. To say that you haven't/can't learn anything here speaks to your absolute separation from reality.

    12Reply
  • Martin S.
    OP
    Brooklyn, NY · Member since 2014 · 174 posts · 23 votes
    11y
    Originally posted by @Jeremy Davis:

    hahaha oh and if you found a house for sale for 38k in columbus you my friend are on the hilltop.... hilltop USA one of the worst parts of town!!!! you suck at life, at investing, and should leave investing to the big kids :D 

    This was just a quick look at Ohio for me. I didn't go too deep into searching for something good.

    Its pretty north of Hilltop. All of south Columbus is pretty bad. North West is good and this was just a quick search. I'll look later on today and find some more. This house was recently sold and whoever purchased it put it back on the market...

    I did say I wouldn't live there. Its still an okay neighborhood, but barely. Almost shows that 2% is possible.

    0Reply
  • Dawn AnastasiPro Member
    Rental Property Investor · Milwaukee, WI · Member since 2013 · 6k+ posts · 4k+ votes
    11y

    You aren't going to get 2% if all you're considering "good neighborhoods" to be are million dollar mansions and upscale New York condos.

    Podcast Guest on Show #29
    5Reply
  • Engelo RumoraBusiness Member
    Investor · Toledo, OH · Member since 2013 · 4k+ posts · 2k+ votes
    11y
    Originally posted by @George N.:

    First off, you're obnoxious and tactless so you've probably killed most chances for success right there. At the risk of feeding a troll...

    I have sometimes felt that BP is heavy on wholesaling/yellow letters etc. The frequent talk of 2% etc, made me trigger shy when I was starting out as well. However, by its nature this site will attract mostly active/high volume real estate investors, not someone who buys 3-4 properties and leaves them alone for 25 years. So that's natural.

    It's also important to keep in mind that it isn't 2009/2010 anymore. The market has rebounded so at this point in the RE cycle the numbers aren't that attractive overall.

    That said, the 1% and 2% rules are basically rough estimates of cap rate. a 2% property is going to mean a +/- 10 cap and a 1% probably about a 7. 10 caps are going to be tough to come by, even during bad times. But there entire asset classes where a 10 cap is the norm. I'm about to close on a mobile home park in the 10 cap range and I think I can value add on top of that. Most buyers and sellers use that 9-10 cap as a benchmark for MHPs. Would I live in one? No. And there's the other point.

    Your single-minded ignorant obsession with the need to want to live somewhere yourself to buy there is another problem you're having. I would only buy somewhere that I was willing to do business in and be comfortable working with. But I don't have to want to live there myself.

    So yes, people are buying 2% properties and houses. There are little houses in Indianapolis, Toledo, and other rust belt cities that you can probably get 2% for, even retail. And they won't be war-zones. But they will be older, need more maintenance, and appreciate much more slowly. So, wow, you're discovering there's a trade-off in a free-market economy. Higher returns require more risk/work. Lower returns are more passive and risky. I haven't seen anyone here claiming they're picking up high-rise NYC condos at 2%. But, unfortunately for you, you're making a fool of yourself as you come to this realization. You have an entitled attitude, you're obviously unwilling to listen/learn, and you let frustration turn you into a jerk. These are all the qualities of a failure/loser. I'd take a step back and re-evaluate myself if I were you. This is an incredible amount of information on this site related to every aspect and niche of REI. And amazingly, it's free. To say that you haven't/can't learn anything here speaks to your absolute separation from reality.

    Very true George,

    We are buying them all day long in Ohio.

    Thanks and have a great day.

    Podcast Guest on Show #89
    Oz Realty4.5367 Reviews
    WebsiteView Page
    1Reply
  • Mark Del Grosso
    Rental Property Investor · Lockport, NY · Member since 2014 · 119 posts · 109 votes
    11y

    Martin is a genius. He is trying to get many of you to do his research.

    I must say I have enjoyed this thread. Ha ha

    0Reply
  • Ryan Mullin
    Real Estate Broker · Indianapolis, IN · Member since 2009 · 575 posts · 496 votes
    11y

    LOL Great thread!   Just read the whole thing.   

    0Reply
  • Brad Clarizio
    Flipper/Rehabber · Columbus, OH · Member since 2014 · 161 posts · 116 votes
    11y

    Perhaps you are too good to invest in lower income areas.

    I have about 40k in 3 properties and collect $2,075 a month....over 5%. 

    Bought pretty damn cheap (cash), did a good, quality rehab (all new painting, floors, gutted bathroom and kitchens and put builder grade in, etc.) and rent to people who qualify. Owned over a year, made over 20k profit after taxes and insurance. 

    It can be done. 2.5 years ROI sounds tasty in my books.

    1Reply
  • John HornerPro Member
    Flipper/Rehabber · Columbus, OH · Member since 2013 · 1k+ posts · 655 votes
    11y
    Originally posted by @Jeremy Davis:

    hahaha oh and if you found a house for sale for 38k in columbus you my friend are on the hilltop.... hilltop USA one of the worst parts of town!!!! you suck at life, at investing, and should leave investing to the big kids :D 

     That property is in Hilliard, OH, not hilltop.  Not a bad area and will Def bring 2%.  My neck of the woods.

    0Reply
  • Brad Clarizio
    Flipper/Rehabber · Columbus, OH · Member since 2014 · 161 posts · 116 votes
    11y

    This being in Columbus, OH btw. 

    0Reply
  • Mark Del Grosso
    Rental Property Investor · Lockport, NY · Member since 2014 · 119 posts · 109 votes
    11y

     Podcast famous four question "What seperates those that succeed from those that drift away" Exibit"A".

    6Reply
  • Vince Beusan
    Laguna Hills, CA · Member since 2014 · 146 posts · 31 votes
    11y

    Depending upon your strategy and what is important, high cash-flow, high appreciation, one or both   @Chad U. is right, mid-west region is where the 2% rule can generate positive cash-flow.   Also, @Jon Klaus is right, stay away from MLS for full retail pricing. If you wholesale, or can get a hold of a wholesaler in the target market you desire, you'll have an advantage to help you get the investment numbers inline.

    0Reply
  • Chris Martin
    Investor · Willow Spring, NC · Member since 2009 · 5k+ posts · 3k+ votes
    11y

    @Martin S. 

    I think it is time for you to change your name to 'Account Closed'. Once there, you can connect and share stories with Joe Gore. It's clear that there is virtually nothing on this site for you.

    4Reply
  • Jeremy Davis
    Canal Winchester, OH · Member since 2014 · 151 posts · 55 votes
    11y

    I'm still waiting on the address in columbus that sold for 38k and is getting 1k/month in rent ???? 

    0Reply
  • Jon Klaus
    Developer · Garland, TX · Member since 2008 · 8k+ posts · 4k+ votes
    11y
    Originally posted by @Jeremy Davis:

    I'm still waiting on the address in columbus that sold for 38k and is getting 1k/month in rent ???? 

     This one? 4308 Packard Dr, Hilliard OH 43026

    0Reply
  • Jeremy Davis
    Canal Winchester, OH · Member since 2014 · 151 posts · 55 votes
    11y

    haha, ok so that house did sell for 36,900 It had no carpet, the walls had wallpaper that was peeling off of the walls, the fireplace was ripped out leaving a hole in the ceiling Dish washer was from the 70's so did they pay to replace it or did they add new cabinets, water damage in one bedroom walls all ruined in the bath doors, missing, wood paneling, doesn't state it had heat, ac, or hot water heater and judging by the house they are all missing or not work... just going to assume rehab was extensive for such a small house, not one thing in the house was salvageable. 

    ok so purchase price of 36900 plus 15-20k in rehabs. Even at 15k in rehab he is only close to 2% as martin would say as they would have to collect 1038 to be at 2%.... 

    0Reply
  • Hattie Dizmond
    Investor · Dallas, TX · Member since 2014 · 2k+ posts · 1k+ votes
    11y

    Y'all...

    I've been tied up with my day job all day.  :(  I get a link to this thread, which now has 7 pages of posts...126 by 37 users...all since this morning.  And, I have to admit, I'm baffled.  Why in the world are you guys wasting all this energy and all these keystrokes assuaging @Martin S.have a really nice day.

    Hattie

    3Reply
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