The 2% rule is an awful rule and should be ignored. It contains a number of assumptions, most of which probably don't apply. Do you own evaluation.
Lots of folks buy rentals that are cash flow neutral or negative. They're looking for long term appreciation.
Given that the 1% to 2% rules are more guidelines than rules, do you have a guideline of your own, or do you look solely at each potential deal for its own unique merits? Of so, how do you filter the gems from the junk?
The 2% rule should be a "rule of thumb". You're rent/cost should depend on the area. Remember, the national average is something like 0.8%. In really nice areas, if you can get a 1.2% or 1.3% you're doing fine. If you are too dogmatic about the 2% rule it can lead you into some war zones that look good on paper, but don't turn out that way when you're tenants don't pay rent and then wreck the property and then it gets broken into and all the copper gets stolen... ask me how I know these things...
I'm an investor, rehabber and property manager in Tarrant County with investor clients from all over the country. To get 2% (I assume gross) on your property will be difficult. DFW market is a hot seller's market. And as others already mentioned, getting 1.2% is considered above average.
I bought a new construction property in Keller in "07. I thought I would do ok with 1%. This was before I found BP and learned about the 2% rule/guideline. I break even on it.
I didn't account for the high taxes. It rents quickly and has only been vacant a total of 2 weeks since I bought it.
Joe Gore Yeah they pillaged SoCal last year this time. I got lucky and got one before they gobbled everything up.
Yes our friends that were out from California mentioned this too that it is going on in Irvine as well. They said cash offers have put even 4 bedroom 1800 square foot 2 story homes up to $800k now in West Irvine 92602.
Hi Steve,
I'm an investor, rehabber and property manager in Tarrant County with investor clients from all over the country. To get 2% (I assume gross) on your property will be difficult. DFW market is a hot seller's market. And as others already mentioned, getting 1.2% is considered above average.
Joe Gore Yeah they pillaged SoCal last year this time. I got lucky and got one before they gobbled everything up.
Yes our friends that were out from California mentioned this too that it is going on in Irvine as well. They said cash offers have put even 4 bedroom 1800 square foot 2 story homes up to $800k now in West Irvine 92602.
I'm curious Richard, what would a home like that rent for?
Joe Gore Yeah they pillaged SoCal last year this time. I got lucky and got one before they gobbled everything up.
Yes our friends that were out from California mentioned this too that it is going on in Irvine as well. They said cash offers have put even 4 bedroom 1800 square foot 2 story homes up to $800k now in West Irvine 92602.
I'm curious Richard, what would a home like that rent for?
I have rentals in Tarrant county mostly Arlington and Fort Worth. The rental market is very strong and my houses usually lease in 1-2 weeks.
I have never been able to achieve the 2% rule. I have been able to get 1.5%. I bought most of our properties off the MLS, a few off market deals and a few from letters, and a few from wholesalers.
I have a duplex and a single family, one in Richardson, the other Dallas (Oak Cliff). I am focusing on direct marketing right now. The MLS is extremely competitive, and I have not found anything there the past year or so that meets my investing criteria.
DFW is hot but there are opportunities out there if you put in the work. Look in the niche areas and outside the beaten path. For example a lot of the north Dallas suburbs are really hard to find deals(Irving, Allen, McKinney, Richardson) Meanwhile other areas that may have fallen by the wayside are overlooked like Tarrant county or south of Dallas.
I don't know if its the Chinese but I could definitely see hedge funds getting in the mix over inflating things. Or Chinese hedge funds.
The problem with the 2% rule is that it means different things at different price points. 2% at a $50,000 house getting $1000/mo is way different than a $200,000 getting $4000/mo. In fact the higher the price point the more likely you can be successful with less than 2%.
Does anyone know a reputable wholesaler in DFW that you have done business with? I am tired of talking to so called wholesalers who are trying to sell there properties for close to if not full retail.