When does the 2% trump all and when to let it slide

[Mark Derby]

I'm in Massachusetts where things aren't cheap. I can't imagine ever getting close to the 2% rule on an acquisition. Maybe I've got it wrong:

Total monthly income from the property / 2% = purchase price. ??

My up/down 2 family is at 1.12% and it's positive by $1200 per month, assuming no maintenance...

Are there any applicable situations where this rule holds less weight? I'm looking at a deal that would be just just under 1% but its a completely renovated 5 family, roof, windows, utilities, vinyl siding, etc. Again, assuming no maintenance, it would be positive by about $2800 per month and pay almost $6000 in equity.

How low would you go?

[Rob L.]

I'm with you @Mark Derby . As everyone mentioned the 2% rule is a metric that can be used when evaluating properties. But, its one of many things you need to look at. We have such a strong market in Mass that I have new tenants ready to move in the same weekend old tenants are moving out. And I've been getting a rent increase to boot. Now, this wont happen for ever but that's probably why we have a hard time with finding 2% deals. So its a give and take but it can be a slippery slop if you don't adhere to some type of metric in order to make sure your cash flowing.