How would you improve upon the 2% "rule"?
I've struggled, along with others, with the 2% rule. It has some drawbacks which I think can be improved upon with BP community help.
Simply stated, the income from a house should be greater than or equal to 2% of the mortgage.*
The * is that the rule doesn't apply to some markets like much of California or most major metropolitan areas. In other markets, you can get 3% where houses are cheap and repairs are about the same, turnover is high, or crime is higher ... for Josh, we'll say, Detroit.
In certain parts of Atlanta, you can sometimes only get 1% rule houses. However, they are less desirable areas, e.g. C or worse. In the A areas, you'd do well to get an 0.75% house.
House price also has a role, right? A 1985 construction, 2000 sf house that costs $400,000 in a more desirable part of town is going to have similar repairs to the same house in a less desirable part of town where the same house costs, $50,000.
To me, houses should be graded like bonds or stocks. Risk should play a much bigger role in the evaluation.
How do you deal with or adjust for these issues, if it all?
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Developer
- GaREIA
