2% rent of purchase price

[Qui Van]

Hello, all

I recently listened to the podcast, I believe it was episode 11, beginner's guide.  They said a rule of thumb on evaluating purchasing a property is if you can rent it out for around 2% of the purchase price.  I find that crazy because I bought my home 5 years ago for 305k.  I can not rent it out today for 6k.  Am I missing something?  Thanks

[Greg M.]

A good rule of thumb is that you should ignore people who use rules of thumb when making financial decisions. I know a lot of people like them as they are a quick way to triage deals, but they are super generic and area specific. 

2% may be doable in some low cost of living areas that have zero appreciation. I could do 0.5% in my area.

Ignore the rules of thumb. Focus on ALL the numbers and see if they meet your criteria for the risk, work, and money you are investing.