If you know how to manage the person managing your properties, then go ahead and travel around.

I havent' run your numbers to see if your caculation is right but i can tell you a simple rule that i learned.

if rent is $850. you gotta purchase the house at $42,500 or less for it to be a good rental deal.

If you follow the 2% rule. basically it's the monthly gross rent divides by the purchasing price must equal to 2% or higher. for example, if the gross rent is $850, the purchasing price must be $42,500 or less to satisfy the 2% rule.

Now there are other special exceptions. for example, when there is so much equity in the house (50% or more) but it just doesn't rent well. Remember, this is a very rare scenario, usually if you buy it cheap, it should satisfy the 2% rule.


so based on your numbers above. it's a bad bad deal. even at $60,000.

I just hit "last page" and saw this thread (no idea what you're responding too)

But i have "run the numbers" on probably 2K+ properties now..and I have NOT ONCE seen a 2%...I have not even seen a 1.5%...nor a 1.4%...the best I've EVER SEEN was a 1.3% that was a ******ed seller/fluke (and I picked up less than 1 hour of it going on the market )

1% in an "ok neighborhood" is the sex/standard

I'm going to have to call BS on your 2%

p.s. if anyone brings me a 2%...pretty much in ANY market...and I will pay a HUGE finders fee/be ready to move on that property same day cash (aka 3 days ldo)

What market are you in?


I know for a fact larger metropolitan areas will rarely have a deal like that but in the rural areas it is much easier to find it.


Some dude that lived 4 hours away in a rural area of town that had to liquidate his properties emailed me with a deal like that, I had to pass..... Maybe I should not have.......

well...in REAL RURAL areas you can...but hard to get loans cause no comps in the area (plus horrible as an appreciation play/very unstable)

imo getting 2% at 100% down is worse then 1% at 10% down

edited to add: other reasons to avoid ultra rural is stuff like no property management companies...tough to rerent or to sell (most of the time people are forced to do owner financing which may or may not be something you wish to do)

2% is the basically the rule of thumb when it comes to rental real estate investing. I usually use this basic rule to filter houses that i get from my realtors. Now there are exceptions where one would go for lower rent but higher equity or even speculate on appreciation. i look at these too as well but i try to stick to the cashflow side of the investment more. I would think that anything over 1.5% would be okay to invest in. 2% is def. a good investment.

As far as where you can find deals with 2%? Try craigslist for cities like Buffalo, Rochester, Dallas, etc.

However, if you aren't local to those areas you will have a hard time getting 2% from these properties won't you?

I'm pretty sure that all the properties I own produce at least 2% of the PP in rents. Its not an apples to apples comparison because I buy commercial properties. But I wonder how you are shopping for properties that you can't find deals like this. Obv you aren't going to find these deals on the MLS.

I dont' use 2% as a guide. I'd rather just use GRM, which is basically the same thing except that everyone knows what it means. But the obvious problem with either GRM or 2% is that they don't consider expenses. That is why, IMO, cap rate is a much better indicator of the strength of an investment property.

Obv getting 2% from a property that was built in 1909 that has been a rental for 45 years is not the same as getting 2% from a property that was built in 2002 and has never been a rental.

A lot has already been said in this thread. I suggest that anyone who wants to add something here spend the time to read through the entire thread first.

This is a hard question to answer. Its like asking Phil Ivey what kind of life playing poker professional allows him. I bet he's say "well....it allows me to play poker all the time, which is what I love to do." That is kind of how I feel. I like to make deals. I like to talk to other investors. I like to operate my business.

At the same time, I've deliberately structured the business so that I can pretty much work as much or little as I want to. The staff deals with tenants and stuff. I do most of the bookkeeping, but I also have a lady that will do my bookkepping for me if I need her.

So pretty much if I want to leave for a few weeks or something, its not that big of a deal. This didnt' happen overnight. It takes time to find and develop your staff. But yeah, I guess I could go ahead and travel carefree if I wanted to.

Did you get a real estate license and is it useful at all?

Hey I got some time to read through this thread - Ive been VERY busy with my recent property purchase and thought I'd add some of my thoughts to this thread.

- The 2% rule is bogus, I agree with Rika, not really sure who/why came up with this. I have asked a couple times, and I'll do it again, someone show me a property where the gross rent is 2% of the purchase price. 1% is seems more realistic.

I want to see a 200K property bring in 4K rent... lol

- Spex has also mentioned deducting 45% off the gross rent for 'expenses'. For his situation where he has 100+ properties and has people doing most of his work - its fine. But for the beginner - I disagree with this rule. It is a very broad estimate of expenses since property tax/insurance will be calculated dead on - maintance is taken care of tenants.. etc. I'd say putting away 20% of gross rent for misc. expenses is MORE than enough - but thats just me...

Just wondering what everyone thinks of this property:

http://www.mls.ca/PropertyDetails.as...ertyID=7214649

It's a 1 bdm condo about 4 blocks from a local college and about 8 blocks from the downtown core. Mortgage would be $675 per month based on full asking price and condo fee about $170. I think I could get this for around 90K which would mean a mortgage of close to $600. I could sell existing investments and pay cash but I'd be losing the advantages of leverage and writing off the interest for tax purposes. The unit is currently renting at $700 per month. It might seem high for a smallish condo but an average home here (Edmonton) is pushing 450K. Vacancy rates in my city are about 3% which is up from last year when it was virtually zero.

so you will have a $845 monthly payment and the unit will bring in $700 for rent. how many of these can you buy until you go broke?

Does the renter pay the $170 common charges on top of this $700 or as part of it?

Robert Kiyosaki is in the house just teasing

There's more to think about then just cashflow...however for a first investment...I ALWAYS recommend + cashflow only (gotta learn to walk before you run imo)

No, and I doubt it would be of much use. It depends on what you are doing though. I'm sure that GiddyUp has found his license to be somewhat useful.

I'm curious what caught your eye with this. This is a obvious instapass unless you are getting at about 30% below market value, in which case you should probably buy it. Or maybe if the $700 rent is way below market or something. What did you see in this property that caught your attention?

In this town that is about as low as you can snatch up a rental property for and it is a very good location. Also the $700 rental is abit low - I'm sure $800 could be had. The 675 mtge payment was based on full asking, but the market is slow now and a guy might be able to snag this for 90K which would be about a $600 mortgage. It would still be cash flow negative by about $100 when you factor in property taxes. I didn't think it was a good property perse, but where I live you are looking at 250X purchase to rent multiples minimum. This is in the 160 range based on asking price.

This seems absurd. You are saying right now there is a guy paying $700 rent for a place where $300 of that goes to taxes and condo fees?

Thanks for doing this thread spex, I feel like I've learned a lot.

I assume that when a tenant is found, some sort of contract needs to be drawn up. For someone who is buying their first property, should they draft their own tenancy contract, or is this something that should be handled by a professional?

Spex x,

How do you find your deals? You mention that you dont use MLS. What do you use for finding houses/apartment buildings/trailer parks? Do you have any agents that try to find you deals?

I've read the entire thread. As numerous others have mentioned, thanks to all who have given their time here asking & answering questions.

The thread has been incredibly interesting, overwhelming, thought provoking, frustrating and exciting ... I'm going to read the entire thread again, and then probably again as I believe it has an absolute ton of value ...

However, there's some things that still aren't clicking for me, like statements like this:

( In regards to a property not meeting the "2% rule" )

What does this mean? That the seller has 50% equity in the house so there's more room for negotiating? I wouldn't think that makes sense because you would've already been able to negotiate down to a 2% situation ...

Again, thanks to all who have contributed to this ...

I am going to my 1st auction on thursday. This starting bid looks like $128,000 for a 5 family thats assessed at 600k. What should I expect here? After the opening bid set by the bank do they accept anything over it?

where did you find out about the auction?

Also just got a call from TCS Foreclosures who are a partner of with Realtytrac wanting me to listen to some conference call about their investor network. I am pretty sure that its one of those deals where I do the research into preforeclosures and get a fee for giving them to the investors. Probably a scam?