Mike,
I was reading your book again. Good stuff. Let me throw one at you based on your formulas.

Home REO worth 90K Needs 20K in work.
Based on the formulas in the book using the 70% of value – repairs it would look like this:
$90,000.00 x.70= $63,000.00-$20,000.00 in repairs would be a MAX OFFER OF $43,000.00.

Now this property would rent for $750.00 per month. Using your 2% rule as follows:
Gross Rent: $750.00.
Expenses $375.00
NOI $375.00
Based on $750.00/.02 = $37,500.00
So my question is which one would you pick. The lower one I would think.

That is just it. I would not pay 43K for this property. Maybe 35K or a little lower. I just wanted to get some clarification in my head while reading the book.

Well on page 131 of the book is the formula. The 2% rule then - repairs. Gotta read better. :beer

Yes, pick the lower and you still need to do a cash flow analysis to make sure that you’re getting the $100 per unit per month positive cash flow (or whatever you have chosen).