Buying & Selling Real Estate Discussion

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2% test or the 50% rule?

Posted Aug 31 2019, 13:34

It is clear that neither method is perfect, however we want our first investment property to mainly be a cash flowing property. Appreciation is great, but for a house hack, we came across a 2005 home that does not have as much appreciation potential as we would want. However, it is in a great location and is affordable. The listing is a 230k duplex and projected income of 1160. The PMI is 106. Given the 50% rule, this should cash flow $474 clean per month (1160/2-160=474). However, given the 2% test, the numbers work out to 1160/230000= .005 or .05% (not good) So am I doing something wrong? This seems like a good deal but i'm not sure if the numbers are agreeing with me. Could someone help me with this dilemma?

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