Trouble with the "2%" rule for buy and hold

[Joel Johnson]

Hello community, We only own one single family home and it's the one we live in. Our goal is to create passive income through buying and holding rental properties. I have heard on the podcasts that to be successful with rentals you need to be getting 2% of the property's market value in rent each month. Well, I have completed a few rental analysis reports using the BP calculator and the last one I did returned a cash flow of $600/month. I thought "this is fantastic!". However, the rental percentage based on market value ends up being .8%. Estimated value after repairs is 185,000 and the rent estimate based on comps is $1,500. Horrible based on the 2% rule! The 2% rule would demand $3,700 in rent a month. Not possible in this area, but $600 cash flow is great! Right? The reason it cash flows so well is the asking price right now is $99,000, it needs about $20,000 in repairs (estimation based on photos haven't walked it yet) What am I missing??? I might completely misunderstand the rule. Thanks for your help, Joel & Bethany Johnson

[Brie Schmidt]

@Joel Johnson the "2% rule' doesn't work in all markets, I find it really only applies in under $100k markets where the expenses are higher and you need it to be at 2% to be profitable.  In my local market it is hard to find even 1% and that does not mean it is a bad investment.