Any Markets still follow 2% rule for rental properties

General Landlording & Rental Properties
1yFollow

Any Markets still follow 2% rule for rental properties

Gp G.
Investor · Atlanta · Member since 2019 · 522 posts · 89 votes

Hi,

Any Markets still follow 2% rule for rental properties that are in decent location, decent rents.. Which market allows this so that I can make more cash flow.  Most of the markets I see following less than 1% rule like 0.5% rule like If I purchase for 100k getting rent around 500$ a month which gives no cash flow after mortgage, insurance, maintenance, property manager. Please advise

4Reply
134 views

Most Popular Reply

Scott Nachitilo
Property Manager · OK · Member since 2024 · 98 posts · 74 votes
1y

The 2% rule (where monthly rent equals 2% of the purchase price) is rare in today’s high-priced markets, but smaller, undervalued areas still offer potential. However, you can look toward Midwest/Rust Belt cities (e.g., Detroit, Cleveland, Memphis) or rural towns in states like Indiana or Ohio, where sub-$100k homes in stable neighborhoods can fetch $1,200–$1,500/month (close to 1–1.5%). 

Focus on distressed properties you can renovate to boost rent or consider multi-family units to spread costs. While hitting 2% is tough, targeting 1%+ with strong expense management (e.g., DIY repairs and minimal vacancies) can still drive cash flow. Partner with local agents or investors to uncover off-market deals; they’re often the key in competitive markets.

6Reply
See this reply in the discussion

22 Replies

Jump to latestLatest
  • Ryan KellyBusiness Member
    Real Estate Broker · Austin, TX · Member since 2018 · 1k+ posts · 1k+ votes
    1y

    Good luck finding almost any market above 1%, let alone 2%. Plus, they will typically be low appreciation, low population growth markets. You are correct, most larger markets are seeing closer to 1/2 of 1% rent to purchase price ratios. 

    [email protected]512-674-5478
    Ryan Kelly Group - Keller Williams5112 Reviews
    WebsiteView Page
    6Reply
  • Scott Nachitilo
    Property Manager · OK · Member since 2024 · 98 posts · 74 votes
    1y

    The 2% rule (where monthly rent equals 2% of the purchase price) is rare in today’s high-priced markets, but smaller, undervalued areas still offer potential. However, you can look toward Midwest/Rust Belt cities (e.g., Detroit, Cleveland, Memphis) or rural towns in states like Indiana or Ohio, where sub-$100k homes in stable neighborhoods can fetch $1,200–$1,500/month (close to 1–1.5%). 

    Focus on distressed properties you can renovate to boost rent or consider multi-family units to spread costs. While hitting 2% is tough, targeting 1%+ with strong expense management (e.g., DIY repairs and minimal vacancies) can still drive cash flow. Partner with local agents or investors to uncover off-market deals; they’re often the key in competitive markets.

    6Reply
  • Patrick DruryBusiness Member
    Real Estate Agent · Columbus, OH & Cleveland OH · Member since 2021 · 1k+ posts · 2k+ votes
    1y

    @Gp G.
    You can find deals in C locations of Cleveland that are in the 1-1.2% rule range. Anything that's a 2% rule is probably in more of a D/F location. 

    [email protected]614-412-4565
    Reafco-556 Reviews
    View Page
    0Reply
  • Sam McCormackBusiness Member
    Real Estate Agent · Cincinnati, OH/NKY · Member since 2021 · 1k+ posts · 833 votes
    1y
    Quote from @Gp G.:

    Hi,

    Any Markets still follow 2% rule for rental properties that are in decent location, decent rents.. Which market allows this so that I can make more cash flow.  Most of the markets I see following less than 1% rule like 0.5% rule like If I purchase for 100k getting rent around 500$ a month which gives no cash flow after mortgage, insurance, maintenance, property manager. Please advise


     If you found something that follows the 2% rule, I would definitely not recommend buying it, haha. Everything is fun and games until that "2%" is there and the market has a rapidly declining population, tenant destroys everything and gets away with it while not paying for it nor rent, dead bodies outside, etc you get the point. Then your "2% rule" is actually just a blackhole for your money to go into. 

    1% rule (cash flowing) is very possible though. You have to be in the right market, that of course doesn't have declining population and a decent economy. There are a few properties in the Greater Cincinnati market that I can shoot your way and we can talk more about making sense. And I should mention, that in warzones, but areas that I don't mind investing in. Let me know if we can talk more about the Cincinnati market

    [email protected]859-443-4952
    Sam McCormack Realtor
    View Page
    1Reply
  • Calvin Thomas
    Developer · New York City, NY · Member since 2015 · 812 posts · 718 votes
    1y
    Quote from @Gp G.:

    Hi,

    Any Markets still follow 2% rule for rental properties that are in decent location, decent rents.. Which market allows this so that I can make more cash flow.  Most of the markets I see following less than 1% rule like 0.5% rule like If I purchase for 100k getting rent around 500$ a month which gives no cash flow after mortgage, insurance, maintenance, property manager. Please advise


     Possibly.  Have you checked the real estate options on the Moon or Mars?

    5Reply
  • Taz Zettergren
    Real Estate Agent · Memphis, TN · Member since 2019 · 365 posts · 264 votes
    1y

    @Gp G..   

    I know a lot of investors are still chasing the 2% rule, but just to set expectations realistically, that’s incredibly rare in today’s market unless you're in heavily distressed areas or working with extreme value add deals. Most stable markets with decent neighborhoods are closer to the 1% rule and even that often puts you in less desirable areas with trade offs in consistency and long term stability.

    If your goal is consistency and scalability, I’d recommend aiming around the median-priced home in any given market. Those tend to attract better long term residents and have lower turnover and maintenance issues, rents tend to be around .7-.8 in these areas.

    In leveraged real estate, cash flow is just one small piece of the puzzle. Between debt service, insurance, taxes, management, and upkeep, true cash flow often doesn’t show up until the property's been held long term or is paid off, that's when you truly cash flow. Equity growth, rent growth, tax benefits, and principal paydown are what drive real wealth, not just the monthly spread.

    Hope that gives a little clarity as you plan your next moves. I'd recommend the Midsouth markets because they're affordable, they're landlord friendly states and there's high demand for high quality homes. Best of luck! 

    1Reply
  • Travis Biziorek
    Investor · Arroyo Grande, CA · Member since 2014 · 1k+ posts · 1k+ votes
    1y

    Hey Gp,

    We’re still doing some deals in Detroit that hit around the 2% rule, but it’s definitely getting tougher. These deals are generally value-add duplexes where you’re buying cheap off-market properties and doing a significant rehab. Here’s how it typically works:

    - Purchase price around $60k

    - Rehab cost ~$50k-$60k

    - ARV in the $150k+ range

    - Rent per unit around $1,000 - $1,100/month (or more if you’re pushing for Section 8)

    You used to be able to find these deals with single-family homes about 1-2 years ago, but that ship has largely sailed. Duplexes are where you’re more likely to have a shot at the 2% rule.

    If you’re serious about Detroit and want to dive deeper into this, I’d be happy to chat. Just let me know!

    0Reply
  • Austin WolffPro Member
    Rental Property Investor · Los Angeles, CA · Member since 2024 · 139 posts · 134 votes
    1y

    I'm paid to analyze markets. If a market consistently has properties where the monthly rent is 2% of its purchase price, you don't want to be in that market.

    BiggerPockets
    1Reply
  • Jimmy LieuBusiness Member
    Real Estate Agent · Columbus, OH · Member since 2019 · 3k+ posts · 2k+ votes
    1y
    Quote from @Gp G.:

    Hi,

    Any Markets still follow 2% rule for rental properties that are in decent location, decent rents.. Which market allows this so that I can make more cash flow.  Most of the markets I see following less than 1% rule like 0.5% rule like If I purchase for 100k getting rent around 500$ a month which gives no cash flow after mortgage, insurance, maintenance, property manager. Please advise

    On paper, 2% rule deals look great and cash flow like crazy, but like others have mentioned, they are likely in really bad neighborhoods (probably D/F) and good luck collecting rent on-time and dealing with headache tenants and constant break-ins/police reports. Dealing with those things will eat up any potential profits you may make on the property.

    If you're looking for a real estate market with the 1% rule and amazing appreciation potential while having great tenants/landlord friendly laws, I would definitely suggest Columbus Ohio! It's one of the hottest markets in the US right now with some of the fastest population and job growth and companies moving and developing here. I would recommend taking a look into 26B Intel headquarter development, Amazon, FB, LG, Google, Anduril, Nationwide, Ohio State University, and many other companies here! Additionally, you can still find properties for 120-180k that will positive cash flow and hit the 1% rule. Recently one of my clients purchased a $120k single family house and is currently renting it out for $1550/mo. Anything you buy in the Columbus Ohio market is currently blowing up in terms of appreciation growth. Happy to connect and answer any questions you have!
    [email protected]614-300-7535
    Jimmy Lieu, Red 1 Realty4.9120 Reviews
    WebsiteView Page
    0Reply
  • Karolina Powell
    Member since 2021 · 107 posts · 82 votes
    1y

    I get 1%-1.5% in the Pittsburgh area but I avoid the parts that get 2% here.

    0Reply
  • Drew SygitBusiness Member
    Property Manager · Royal Oak, MI · Member since 2012 · 12k+ posts · 9k+ votes
    1y

    How much risk to you want to take on?

    Bonds are known to be a pretty safe investment with corresponding low returns. 
    There are junk bonds though with higher returns, but correspondingly higher risk.

    So many newbies here on BP looking for high returns with low risk!

    That was 5+ years ago, NOT GOING TO HAPPEN TODAY!!!

    Class C in Detroit can get you 1.5 Rent-to-Price Ratio.
    Class D can get you 2.0, but that's ONLY on paper. Your actual results won't be that due to tenant nonpayment and property damages.

    [email protected]248-209-6824
    Logical Property Management4.9459 Reviews
    WebsiteView Page
    0Reply
  • Kasi V.
    Investor · Texas City, TX · Member since 2018 · 54 posts · 22 votes
    1y

    2%??!! Is it realistic? If yes, it must be with lots of hassles. I don't think  it is worth the effort.

    0Reply
  • Drew Phebus
    Member since 2024 · 21 posts · 10 votes
    1y

    I am getting 1.4% of purchase price. But I do not use a property management company. I'm in Indiana. 

    0Reply
  • Jeremy TaggartBusiness Member
    Real Estate Agent · Pittsburgh, PA · Member since 2014 · 850 posts · 646 votes
    1y

    @Gp G. We have 2% here in Pittsburgh but 99% of the time they are areas that I probably would only invest in if you are here local and can self manage. Relying on third party property management in those areas will be tough. 1.5% is doable here though for turnkey/close to turnkey multis in decent neighborhoods. Won't be areas I would expect to appreciate a ton or have rapid rent growth (unless it's a transitional area that gentrifies), but will cash flow well from day 1. 

    DHRE- The Jeremy Taggart Team590 Reviews
    View Page
    0Reply
  • Jeremy TaggartBusiness Member
    Real Estate Agent · Pittsburgh, PA · Member since 2014 · 850 posts · 646 votes
    1y

    @Gp G. We have 2% here in Pittsburgh but 99% of the time they are areas that I probably would only invest in if you are here local and can self manage. Relying on third party property management in those areas will be tough. 1.5% is doable here though for turnkey/close to turnkey multis in decent neighborhoods. Won't be areas I would expect to appreciate a ton or have rapid rent growth (unless it's a transitional area that gentrifies), but will cash flow well from day 1. 

    DHRE- The Jeremy Taggart Team590 Reviews
    View Page
    1Reply
  • Gp G.
    OP
    Investor · Atlanta · Member since 2019 · 522 posts · 89 votes
    1y

    Do I need to consider age of property for this 1% or 2% rule. As I experienced if HVAC or boiler or roof issues etc. bring all the numbers down. Is it good idea to buy new home for these numbers to work as per 1% or 2% theory

    0Reply
  • Drew SygitBusiness Member
    Property Manager · Royal Oak, MI · Member since 2012 · 12k+ posts · 9k+ votes
    1y

    Not property age, but when & what was updated - which you can verify by checking building permits at local municipality.

    [email protected]248-209-6824
    Logical Property Management4.9459 Reviews
    WebsiteView Page
    1Reply
  • Gp G.
    OP
    Investor · Atlanta · Member since 2019 · 522 posts · 89 votes
    1y

    Do landlords update municipality or county records when they upgrade things like HVAC, water heater, roof etc. ( septic, electrical I heard updating)

    0Reply
  • Kasi V.
    Investor · Texas City, TX · Member since 2018 · 54 posts · 22 votes
    1y

    Lately, I haven't seen any new builds that meet the 1% rule. Even when a new build is around 0.75% +, I still consider it if the CoC% is above 5% and has positive cash flow. To evaluate these deals, I have a calculator that factors in all the expenses and provides key metrics to make an informed decision.

    0Reply
  • Stuart UdisPro Member
    Attorney · Philadelphia · Member since 2018 · 2k+ posts · 3k+ votes
    1y

    The investors who purport to acquire properties that meet the 2% rule are the investors who are completing "gut rehabs" for $25K…… Really all they are doing is slapping lipstick on a pig & making the properties look nice enough to move the least qualified tenants in. In theory they are signing a lease that meets the 2% rule but it's not sustainable because the properties then have endless cap ex and repairs to contend with. These are normally the same investors who purport to own "15 caps" where NOI is calculated as rent minus taxes & insurance :)

    [email protected]
    0Reply
  • Gregory SchwartzBusiness Member
    Rental Property Investor · College Station, TX · Member since 2016 · 1k+ posts · 1k+ votes
    1y

    Took me about 5 min to find a market.

    First, Google "cities with decreasing populations"
    I figured Jackson, MS was a place I'd never want to live. So I looked up home prices on Zillow. Here's a nice $60k option: https://www.zillow.com/homedetails/1064-Arbor-Vista-Blvd-Jac...
    Single-family house, 4 bedroom, 2000 sqft. 


    Then, put the address into Rentometer to find out the average rent in that area, $1174


    So here we have it, a nearly 2% rule home on a house I would never want to buy in a market I wouldn't want to invest in. 

    [email protected]443-812-0357
    Schwartz Realty Group5117 Reviews
    WebsiteView Page
    0Reply
Join the conversationCreate a free account to reply, vote on answers and follow this thread.
Log InJoin for Free