Understanding the 2% & 50% Rules
Hello,
I am new user and first time poster with a question regarding the 2% & 50% rule. I am interested in buy-and-hold investing of small apartment buildings and would like to know if my quick analysis of a particular property is correct.
Cost: $650,000
Units 5: Rent at $1,250 each
May I conclude that I do not satisfy the 2% rule because one would collect only $6,250 in rent (2% of total is $13,000) and that the 50% rule implies I would have $3,125 in revenue before mortgage payment?
With this logic, the deal is obviously a poor investment for my goal of maximizing monthly cash flow, but I would like to make sure that said logic was not incorrectly applied or overly simplistic.
Thank you.