Do You Use the 2% Rule?

The 2% rule has long been a topic of debate in the BiggerPockets community. The 2% rule more or less argues that for an investment to be great, the monthly rent should be at least 2% of the purchase price (a $100,000 home should rent for $2,000 per month). Whether or not you agree, a significant chunk of BiggerPockets members use it as a screen for deals.

For investors in certain areas of the country, achieving the 2% rule may seem almost mythical. Where are people getting such good deals? Are they getting these properties because prices are low, because rents are really high, or a combination of both?

Below you’ll find a list of regions in the country that, according to Zillow, listed properties that on average had the best rent to price ratios in the first half of 2014. These might be great places to start your hunt for a 2% rule property.

Only two regions in the entire country beat the 2% rule on average, and the vast majority of regions in the country didn’t even meet the 1% rule. Parts of Florida, Texas, and rural New England dominate the top 20.

Keep in mind that some of the regions listed have few Zillow listings, perhaps distorting the data. Research these regions thoroughly before making any decision to invest. While this data may be useful in targeting certain markets in which to begin your search for rental properties, it should not be used as an investor’s sole source of information.

Here are some additional notes regarding the data in this study:

• This data only incorporates Zillow listings
• Some regions have very few data points
• This study does not account for important metrics like # of bedrooms/bathrooms, sqft., lot size, etc
• All property/rental prices are listed, and may differ significantly from actual prices

Read more at biggerpockets.com

You must be logged in to post a comment Login