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Real State

What Is The 2 Percent Rule In Real Estate Investing?


How much do you know about investments (stock market and real estate)? Enough to make a considerable amount of money? Absolutely nothing, but you would love to find out? Or somewhere in between?

When it comes to investing strategies, you may have heard about something called the “2% rule”. But is it a good idea? What’s it all about? Let’s define the term and discuss whether or not the possibility of purchasing a property such as this even exists.

The 2% Rule – What Is It?

The 2% rule applies to an investment amount and the money that can be made by the investor. For the investor, a positive cash flow will likely be produced if the following applies:

  • Real estate: If at least 2% of the purchase price for a given property is equaled by the monthly rent (or the monthly rent exceeds it).
  • Stock market: As long as no more than 2% of an available single trade capital is risked, the 2% rule applies. An investor must first determine their available capital in order to apply the 2% rule. They must take into consideration commissions or future fees that may arise related to trading.

But let’s concentrate on real estate.

Do 2% Rule Properties Really Exist?

The question of whether or not 2% rule properties are real or simply “unicorns” is a popular one. In truth, they actually do exist, and they can be found. Sadly, many of them can be riddled with problems. This isn’t actually surprising if you think about it. If the property is a real cash cow, why would the owner be selling it?

That said, don’t be discouraged. With enough research (check out the neighborhood, crime rate, schools, other properties in the neighborhood, etc.), you can end up a winner. If work does need to be done on the property, consider the additional investment you’ll be making on the fixup project. Keep in mind, too, that you may have to look through a lot of rough properties to find the one diamond.

Will you be able to get the rent you need to satisfy the 2% rule? Check out similar rental properties in the neighborhood and find out what they’re getting for rent. Even if you need to make some small improvements, it could pay off in the long run if it increases your chance of getting a higher monthly rental amount.

Protect Your Investments – Be They in Real Estate or the Stock Market

Learn to guard your personal investment assets and/or your business by working with us at Protect Wealth Academy. Some of our provided services include real estate training, self-directed IRAs, bookkeeping, stock market training, income tax reduction, asset protection, and estate planning.

If you’d like to know how we can help your business, your family, or you, give us a call at 800-276-1430. You can also contact us by emailing [email protected] You can also simply fill out our convenient contact form online. 

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