The 2% rule states that your monthly rent should be approximately 2% of the pur- chase price. In other words, a $100,000 home should rent for $2,000 per month; a
$50,000 home should rent for $1,000 per month. This is a very conservative esti- mate that is very simplistic but can help in deciding if a property warrants a deeper look. In most parts of the country, the 2% is very difficult to achieve, but the closer you can get to that, the better cash flow you'll receive. Real World Example: An average three bedroom home rents for $800 per month in your neighborhood. According to the 2% rule - you should be looking to spend around
$40,000 for that property ($800 / .02 = $40,000) The 50% rule is a great rule-of-thumb that helps you
$50,000 home should rent for $1,000 per month. This is a very conservative esti- mate that is very simplistic but can help in deciding if a property warrants a deeper look. In most parts of the country, the 2% is very difficult to achieve, but the closer you can get to that, the better cash flow you'll receive. Real World Example: An average three bedroom home rents for $800 per month in your neighborhood. According to the 2% rule - you should be looking to spend around
$40,000 for that property ($800 / .02 = $40,000) The 50% rule is a great rule-of-thumb that helps you