Many investors use the 1 or 2% rule as a rule of thumb to do a quick evaluation on real estate deals.
In essence, you take the rent per month and divide it into the price of the property, which yields a percentage. The higher, the better, of course.
Everyone seems to strive for the 2% rule, but I have rarely seen many achieve it. People actually don’t realize how good of a deal the 2% rule is. In the first half of today’s video, I break down the 2% rule to show what cap rate and cash on cash return you are looking at if you are lucky enough to get a 2% deal.
Related: 2% Rule? 50% Rule? Here’s the #1 Real Estate “Rule” I Use to Assess Property
Do THIS if You Want to Achieve the 2% Rule
Many wholesalers and turnkey marketers will show their deals to be a 2% performer but be cautious. You should also consider the area, as properties in D-class areas or war zones can show high performance on paper, but come nowhere near projections in reality. The 2% rule is possible, but it takes a certain angle of attack to get there. In the second half of the video, I go over what you need to do to get to the 2% rule or close to it!
[Editor’s Note: We are republishing this article to help out newer readers.]
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