I Broke My Own Rule and Bought a 2/1

by | BiggerPockets.com

For years, when agents asked me what my criteria was for buying investment property, one of my standard responses was that the property needed to be at least a 3 bed/ 2 bath. I know a lot of other investors in my area that have the same criteria. The thinking is you end up up narrowing your potential market to a very small segment that is willing to live in a 2 bed property.

By and large this is true … most people looking to rent or buy want a minimum of 3 bedrooms and a minimum of 2 bathrooms. Understandably, your average renter or homebuyer needs extra space for children, guests, an office, etc. A 2 bedroom typically doesn’t provide the space that your average consumer wants.

Why I Broke My Rule

So why did I break my own rule that I’ve held fast to for so many years?

Well, one reason is because inventory is tight and I’ve had to broaden my buying criteria (but that’s another topic for another day). The truth is, I’ve learned that buying real estate shouldn’t be about a strict formula applied to heterogeneous property types, neighborhoods, market factors, etc. There isn’t a “one-size-fits-all” formula for buying investment property because there is simply too much variation in the marketplace.

For instance, I’m sure there are people in New York City reading this article wondering what in the world is wrong with a 2 bed/ 1 bath property! This is because rental space in New York City is limited and therefore sold at a high premium. It’s not at all uncommon for someone to rent or own a 2 bed unit. However, in Atlanta, Georgia, most renters and buyers expect more square footage for the money.

So again, if the general sentiment in Atlanta is for more bedrooms and more square footage, why would I invest in a 2 bed / 1 bath? The simple answer is that even within an overall market, there are submarkets and neighborhoods that don’t conform to the general trends in the larger market.

In the case of the 2 bedroom property I purchased this week, it’s located just off of a main road in a high density area with a high rate of growth. In addition, the neighborhood that this property resides in is actually comprised of about 50% 2 bedroom houses. Looking through our local MLS, I can see that many of the 2 bedroom houses in this neighborhood have rented in recent months at rental rates that make sense compared to my investment. Additionally, the 2 beds that have sold in the neighborhood in the last few months have sold for a good bit more than what I paid for the property (ie. my potential profit margin fits within my normal buying models).

Interestingly, I bought this property at the courthouse steps yesterday. It’s interesting because I spent the entire day watching a handful of hedge funds bid other properties up to insanely high purchase prices. However, when this 2 bedroom came up for bidding, not one of them was interested in it. It’s as if they had marching orders from the higher-ups to steer clear of any 2 bed properties. Luckily for me, I wasn’t stuck in a box of what I could or couldn’t bid on.

At The End of the Day…

At the end of the day, the question you should ask yourself is whether or not a particular property will make you money. If the particular market you are buying in supports the demand for a 2 bedroom house, don’t limit yourself on principle alone. I did this for years and probably missed out on opportunities that could have been profitable.

About Author

Ken Corsini

Ken Corsini G+ is the host of the Deal Farm Podcast (on iTunes) and has 10 years of full-time real estate investing experience. His company, Georgia Residential Partners buys and sells an average of 100 deals per year and has helped hundreds of investors around the country make great investments in the Atlanta market. Ken has a business degree from the University of Georgia and a Master Degree in Building Construction from Georgia Tech. He currently resides in Woodstock, Georgia with his wife and 3 children.


  1. Long ago I used to think the same thing. Then I came across some one bedroom condos in a nice area completely under priced and practically being given away. Ran the numbers and the returns were fantastic so I snatched them up.

    What I learned… they turned out to be the most headache free rental properties I own. They rent out fast to busy singles/couples that don’t have parties, pets, etc that tear things up. Turnover is extremely low because the area is very nice. Basically the professional singles/couples I lease to just want a place to sleep and store their valuables in a nice area.

    The values on them have gone up significantly since purchased (more then double in value) and the ROE has gone down suggesting it might be time to sell them but they are by far the most headache free properties I own so I’m keeping them. (Much more headache free then my 3/2, 4/3 single family rentals that are also in very nice areas.)

    Even if one of them was to get trashed, cost for repairs is minimal and I could have my crew in there and fixed in two days max. At the end of the day, It’s all about the cash flow and not having headaches.

  2. I own 3 two-bedroom single-family homes. They rent out well — not as well as three-bedrooms, but still okay. There are quite a number of target markets for this group:

    – Single person
    – Couple with no kids
    – Couple with a kid
    – Single person with a kid (or two)

    It can apply to those who are young and old.

  3. Totally agree. Buy properties where the numbers make sense as long as there is demand. 2 beds are great Condo alternatives. Renting a 2 bed with a little yard has a much higher quality of life than a condo.
    Cash flow with equity is my formula, and I’ll buy just about anything that fits that.

  4. Great post Ken.

    I am in the San Francisco Bay Area. It’s a competitive and expensive market. I am flipping and wholesaling as it is nearly impossible to find cash flow SFRs here. But for flipping, we love to find 2 bed SFRs that have the potential to add a bedroom and/or bathroom. As you mentioned, the competition for 2 bed properties is a bit lower and with our construction costs we can usually add some equity and desirability.

    To your point about expanding your criteria, we’ve been staying away from condos and townhouses so far, but are considering those that we can get in and out quickly.

    Happy investing!
    Peter K

  5. I am glad Ken that you have realized the value of 2/1’s. I recently wholesaled a 2/1 to a Landlord here in my area market(Central, FL) and he told me he is ramping up his investing in December so he wants to buy more of them. They are great for the single senior who is still active; which we all know this segment of the population is growing and these type of properties will be in demand I believe, they are also great for young singles who don’t want to live in an apartment, but aren’t quite ready to buy their own home yet. I am glad you wrote this article and I hope to see more Investor’s re-thinking their position just as you did!

  6. More than half my rentals ate 2 BRs and I’ve flipped a bunch too.
    Actually I’d say my flip margins are a bit higher on these. You can get them much cheaper than a bigger place with a similar scope but they resell at a higher price per Sqft.
    Yes a smaller market but one that pays well.

    I love that most of my colleagues shun them like the plague! 🙂

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