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Updated almost 10 years ago on . Most recent reply

Does the 2% rule apply when equity gain is involved?
I am purchasing a small house for 70k that is worth 110k at current market value.
The 2% rule suggests that I need to rent the house for $1,400 per month. Since I am purchasing the house for 63% of the market value, it seems that buying it would be a good choice to begin with.
So in math terms, since the house has 40k in value after the purchase and the 2% rule is based off of the house grossing the purchase price in 50 months, would I take the equity that I have in the house (40,000) and divide it by 50 then add it to my rental rate? This would equate to $1,550 per month over the course of 50 months which fits into the 2% rule...
I ask this because, in my opinion, this is a pretty good deal for me and I would like to use a simple mathematical metric for evaluating purchases like this in the future.
Does anyone have an idea on how I could evaluate this correctly?
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