Does any body get 2% return from rental property

[Quan Nguyen]

I read the guide for first time investor and the rule of thumb for return on renting is 2% which mean if my property is 100 then my monthly return is 2k. I personal think this number is way too out of reach anywhere in this country. I am living in southern california and you get 2k for property that worth 400-450k. Any idea??

[Russell Brazil]

One thing many on here overlook is that your price/rent ratio will be lower at higher priced properties, but you can still make a very good return at those higher values. This is because as you move up in price, things like repairs and capex will take up a smaller percentage of your rent.  Take for instance in my market place. I could go look at a $50k house in the ghetto...and if I needed to replace the roof on it, it would be about $5k or 10% of the total value of the house. But if I move over to a middle class neighborhood of $500k, that roof is still going to cost me $5k, or 1% of the total value of the house.  So at these higher price points you can have a worse ratio but still make a good return. 

2% I feel is what you need at the cheaper price points. I shoot generally for 1% for my cash flow properties in my market (The 2% neighborhoods are too high risk for me) and my appreciation play properties might be about half a percent.