Rental Property Investor · Encino, CA · Member since 2016 · 324 posts · 178 votes
Greetings,
I live here in the Los Angeles market and by no means expect to find any investment close to the 2% rule both on and off market. I have tried researching recent sales and cross matched potential rents in other markets and am not finding what I am looking for. BP show me proof.
If possible, can anyone provide an address of an investment (all inclusive) that they acquired and currently rent that met the 2% rule (or somewhat close)? Any market will do.
I understand if this is too sensitive to share but I think it would be helpful to show a real life example.
Investor · Fairfax, VA · Member since 2015 · 239 posts · 90 votes
9y
Nice question. In my experience on the east coast, this varies a lot depending on the local areas and we never see 2% unless it is off market and highly distressed. My firm actually does this analysis all the time, automated for our clients. In the Washington DC area, we do the math on roughly hundreds per day. Based on what I see:
DC: The very best are at 0.8%, unless they need tons of repairs or are Class C/ D. Class B are generally 0.7 or worse.
Northern Virginia: In NOVA- in 2015 we could get 0.8% occasionally, but recently, in the past year has been more like 0.7% for the best, unless they are far out exurbs. In Fairfax County for example, the best I see (discounting for condo fees) is roughly 0.75%. I will see rehabs at 1% sometimes farther out, which are good for investors with contracting experience or with a good GC.
Maryland: Very county dependent. The best you ever see regularly is 0.75% in Montgomery County. PG is more varied- it really depends on the area. You can get 1% or more in some markets (Class C/D) and in Anne Arundel you can get over 1%. But the vacancy/ collection loss risk can eat up these "paper profits" pretty fast, along with the older housing stock issues in general... which just run higher on maint.
Curious to see who, if anyone, hits 2%. Would be VERY impressed if it's not Class C/D.
Rental Property Investor · Milwaukee, WI · Member since 2013 · 6k+ posts · 4k+ votes
9y
Most of my properties hit the 2% "test". That doesn't mean investments at 1% or lower are necessarily bad or wrong. Everyone has their own investing strategy.
Real Estate Investor · North Ridgeville, OH · Member since 2016 · 97 posts · 81 votes
9y
@Account Closed sure we can. Keep in mind I only buy distressed properties such as bankruptcy, foreclosure, REO, or medicaid sale. That's the only way I can get the prices I have been. All three condos I have bought were really in good shape and needed less than $500 each in repairs before they were rent ready. My calculations don't take appreciation into account because I don't ever plan to sell the properties. I am looking purely for retirement income, so I don't ever see a need to sell.
Specialist · Grand Rapids, MI · Member since 2016 · 1k+ posts · 611 votes
9y
Walter Roby jr List is too long. But if you need someone to show you nationwide then your problem is probably awareness. 2 Percent is just a rule, not the only rule and I prefer ROI and 50 percent rule over 2 percent. I shoot for more like 1.5 percent because better areas.
Rental Property Investor · NY · Member since 2013 · 844 posts · 350 votes
9y
Diane G. To your statement as to why people do not buy when it is 3 years rent simple. People do not save!
I have a friend who makes $250,000 a year and guess what he has less then 5k in the bank.
It's not what you make its what you save.
Rental Property Investor · NY · Member since 2013 · 844 posts · 350 votes
9y
@Jerry Poon I am investing in Northern NY. But I will warn you I have spoken with other investors from California who have had upwards of 30-40k stolen from them by property managers.
I see that you may already be invested in the midwest I would focus on one city and build a strong team that you can trust and buy more properties their so that when you need to fly in to check on things you ar spreading the cost of your travel against 10-15 properties rather then 3 or 4. Also the more you scale the more important you become to managers and get better pricing.
The hardest part is finding people you can trust. And then finding deals comes second.
South Bend, IN · Member since 2015 · 180 posts · 93 votes
9y
@Walter Roby jr To answer your question, you can find good 2% deals in the good ole US these days. About 8 months ago I bought a 3-2 near Notre Dame in South Bend and hit 2%, it has been rented to a couple of good tenants for $1100/month for the past 5 months. I bought it for $40k put $12k into it, so I am all in for $52k. Based on my research, it would be pure chance to find a 2% deal in most major metro areas.
Investor · Akron, OH · Member since 2016 · 2k+ posts · 4k+ votes
9y
Akron, Ohio here. We recently purchased our first rentals, 2 side by side 4 units for 67,200 each; We had a total purchase price of $134,400 for 8 units plus we made about $8000 in repairs and upgades for a total of $142400. Total rent is $3375/month. 2.37%. I haven't been able to find anything else that will touch that.
@Ian Walsh I am constantly digging and trying to understand what solid deals look like. I know the deals are there its just a matter of changing your tolerance and perspective. I posted this to see what class of property others strive for to get positive yields and see some actual data.
Investor · The Americas and Europe · Member since 2016 · 1k+ posts · 1k+ votes
9y
Hi guys , great thread! As someone mentioned above, it's probably impossible to find 2% in a growth area so you can get cash flow but don't get the capital gains. You don't need 2% to be cash flow positive after leverage.
So isn't the question what would be the optimal combination of growth and rent / price ratio and where can you find it?
Investor · Columbus, GA · Member since 2014 · 2k+ posts · 1k+ votes
9y
The rental market as a whole is very strong. It's not very often a multi-family comes on the market, at least one that I would buy. There are some older, run down duplexes, but you can do better with SFR. I'm sure a lot of people out there will disagree with me, but a duplex is not a great investment unless you plan to never sell it. There is a very small market for duplexes.
Hi guys , great thread! As someone mentioned above, it's probably impossible to find 2% in a growth area so you can get cash flow but don't get the capital gains. You don't need 2% to be cash flow positive after leverage.
So isn't the question what would be the optimal combination of growth and rent / price ratio and where can you find it?
That is the exact question to ask. It may be different for everyone depending on what your thoughts are. I'm personally expecting another market recession very soon and am focusing solely on cashflow with zero appreciation. These will get hit the least as they haven't appreciated at this point and can also weather through the down turn on cash flow. I plan to shift gears during the down turn and focus on what I would expect to be solid growth area's while the prices are lower than where they are now and ride the next appreciation wave up.
Hod ha sharon, Israel · Member since 2016 · 21 posts · 2 votes
9y
Hi guys,
These numbers look unbelievable and you all seem to be doing a good job altogether.
I'm part of an investor group from Israel and are looking to build a portfolio of SFH in the price ranges under 60K to buy and hold. We didn't even think these kind of numbers still existed for decent properties in OK neighberhoods...
The fact that we are sooo far away and can't come and see every property for our own eyes, means we have to rely and count on the agents and property management companies to get us good deals. As much as the data on the net is helpful we still need the boots on the ground to cover the main issues.
We looked into the Akron, OH market. We wanted to go conservative and find at least 3 large property management company in order to have backups, in case we need to switch at some point into holding the properties. We really liked the OH market but couldn't find three, so for now, we moved on...
At the moment we are looking into the Pittsburgh market which looks promising but are finding it even more challenging to find good deals not to mention the prices you are writing of...
We eventually will find our reliable boots on the ground somewhere but do you guys think you could have found these amazing deals without physically seeing them for yourself?
Real Estate Investor · Arlington, VA · Member since 2016 · 84 posts · 26 votes
9y
Isn't the "2% rule" meant for calculating a good gross income, not net? I think all of you arguing that 2% is impossible because of capEx and repairs, and PM, etc are misunderstanding the rule. A "2%" property would be getting about 1% returns net (assuming the 50% rule).
Investor · Greenville, SC · Member since 2016 · 5k+ posts · 13k+ votes
9y
@Chris Heeren if I could vote for your post twice, I would. None of us have a crystal ball but your strategy works regardless of where of the market goes and has a downside hedge with it.
@Ian Walsh I am constantly digging and trying to understand what solid deals look like. I know the deals are there its just a matter of changing your tolerance and perspective. I posted this to see what class of property others strive for to get positive yields and see some actual data.
Isolate a small geographic area and commit to the 50 house rule. After doing that, you will know what a good deal looks like.
Hi guys , great thread! As someone mentioned above, it's probably impossible to find 2% in a growth area so you can get cash flow but don't get the capital gains. You don't need 2% to be cash flow positive after leverage.
So isn't the question what would be the optimal combination of growth and rent / price ratio and where can you find it?
That is the exact question to ask. It may be different for everyone depending on what your thoughts are. I'm personally expecting another market recession very soon and am focusing solely on cashflow with zero appreciation. These will get hit the least as they haven't appreciated at this point and can also weather through the down turn on cash flow. I plan to shift gears during the down turn and focus on what I would expect to be solid growth area's while the prices are lower than where they are now and ride the next appreciation wave up.
@Chris Heeren I couldn't agree more. Cashflow play today and position yourself for more of an Appreciation play in the next down market. Make money in RE in every market. I have properties in Indianapolis @ 1.7%.