Explain This

[Matthew Mason]

Can somebody Explain to me the 2% rule?

[Ryan Mullin]

Originally posted by @Account Closed:

If the market rents are $800 the market value will only be $40,000.

 Because 800 is 2% of 40k.   

2% rule means monthly rent = 2% of purchase price. or value.  

For me the 2% rule was really only worth paying attention to from the end of 2008 till some time around 2013.  These days 2% deals can still be found no problem but you will find vast majority of investors (especially on BP) prefer to be somewhere around 1.2 - 1.7%.  Not that they want a lower return, but they just favor the more expensive assets.  

That is my observation at least.