I’m looking at a multiunit property in the NY area and as a beginner need some advice. I’ve been reading the posts and am concerned the property does not meet the 2% rule (by a wide margin). The gross rent is $4200 and the purchase price is $329K. A long way from $210K according to the 2% rule. I was planning to offer $290K which will yield 21% annually. What do you guys think?
Some people would jump all over that deal.
But I would not touch it with a 10 foot pole, myself, as I ONLY buy properties that fall within the 2% rule.
You will get rich a lot faster than the next guy.
And those deals CAN be found, whether they are single family homes, apartment complexes or commercial properties - both older and not so old properties. You just have to dig for them a lot harder than the average investor.
Good luck.
I agree with Motivatedceo. The rent is way too low for that purchase price. I also buy houses that meet the 2% rule. It’s been very easy to find those deals where I am because of the economy. I don’t have any marketing plan to find these deals. Luckily I don’t need that here.
But I would not touch it with a 10 foot pole, myself, as I ONLY buy properties that fall within the 2% rule.
I have read frequently about this 2% rule on this forum and many consider it as gospel. Personally, I have NEVER found a deal which is in 2% rule. Either such deals are so good that they are grabbed by insiders having connection or by those who contact the distressed property owners directly and work out a deal (wholesalers).
If you don’t believe me, go to har.com search for area of my interest zip 77388, max list price 50K (2% rule = rent will be $1000 per month), status = Active, 3 bed, 2 bath, 2 car garage, min. 1250 sq. ft, built after 1980 How many houses do you find, ZERO. Yes, that’s not a typo.
Personally, all I really care is whether the cash-flow is good and it justifies the price I am willing to pay. Looking for 2% rule is like the tail wagging the dog, IMHO.
You don’t find those deals on the MLS, 90% of the time. And the 10% of the time they do get on the MLS, the most sophisticated investors put the deal under contract immediately.
And when it comes to the other 90% of the deals, you have to get out and create those buying opportunities yourself.
How?
I use direct mail. I target specific neighborhoods that I know and already invest in, and if/when an anxious seller comes along…I snap up the deal before he even thinks about listing it with an agent. I can buy and close on a house in days, where it can take months selling a house the traditional way. It’s that easy.
There are other ways to create your own buying opportunities too.
If you find a property that fits the 2% rule, you can be fairly assured it will cash flow. Of course there are always things that could go wrong after the purchase that causes the property to cost you more money than expected, but if you buy according to this criteria you have a better chance of the property taking care of itself financially.
Thanks for your feedback. Appreciate the comments.