#AskBP 083: How to Use the 2% Rule When Evaluating Rental Properties?

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In this episode of the #AskBP Podcast, Scott Trench talks about one of the “rules of thumb that many real estate investors talk about – the 2% rule. Scott explains how this rent to price ratio is used when looking at particular kinds of properties and properties in different parts of the country. You’ll learn when and where to apply this rule, and learn about the areas where it has little relevance, and why. Don’t miss this episode on a controversial BP topic!

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About Author

Brandon Turner

Brandon Turner (G+ | Twitter) spends a lot of time on BiggerPockets.com. Like... seriously... a lot. Oh, and he is also an active real estate investor, entrepreneur, traveler, third-person speaker, husband, and author of "The Book on Investing in Real Estate with No (and Low) Money Down", and "The Book on Rental Property Investing" which you should probably read if you want to do more deals.

2 Comments

  1. karen rittenhouse

    Wow. So here’s what we find.

    2% is crazy high – 1% is more common for us here in North Carolina. But most of our holds are nicer properties.

    When we buy lower end houses and buy them cheap, say a $75,000 ARV house for $40,000, – then yes, the 2% rule can apply – we can get $800 per month for those.

    So maybe the people here having trouble understanding how 2% works aren’t realizing that those properties have to be purchased with a VERY deep discount and 2% is of the purchase price, not the ARV.

    Is this correct? No way we can get 2% of ARV here.

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