Could find any property that can pass 2% rule and 50% rule?

Question

I have been looking for properties for months now, I am new starter, I am looking, at Dallas, Charlotte, Columbus, Atlanta and Denver. As I am remote worker, I will move to any place where I find good rental property, I can use one room and rent others. I am filtering properties based 2% or 50% rules,  looked at hundreds property, unortunately I couldn't find a single one that pass, the rules. Looking their mortgage and possible rental income, in most of them , you can see the rental income is almost same as mortgage.  I am wondering, with the current housing market,  is house hack or rental business is dead. I wonder, who is buying rental property while the rent can barely make the mortgage. Am I missing something, or this market is crazy  and it is not good time to go to rental business.

Joe Villeneuve · Answer

Keep looking.  There are more good properties than bad ones out there...and throw away those stupid 2% and 50% "rules".  They mean nothing of value.  Just calculate if, and how much they cash flow.

Remington Lyman · Answer

People are buying to hedge against inflation. There are not that many 2% rules left unless you purchase in war zones

Bruce Woodruff · Answer

Don't use rules, they're for people that can't figure the numbers out on their own. Start your own spreadsheet and enter your own numbers. Do they work for you? Some people don't care about a lot of monthly cashflow, others live for it. Don't forget expected appreciation...lots of factors to consider and everyone is different.....

Larry Turowski · Answer

@Samuel Hailai those “rules” are really filters. And as you can see they are currently filtering out everything.  There was a time when there were so many deals, too many to analyze, that investors would filter using these rules to narrow down which properties they’d look at more closely.  You can still use variations on this, say apply a 1.3% rule. If you find there are still not enough to fill your funnel then broaden the scope. Heck you could just look at every single property. Ultimately, you want to find the best deals that you can and that work for you. For some investors nothing works for them right now. Me?  I’m still buying.

Sebastian Marroquin · Answer

The cost of waiting will be much greater than taking a home with less cash flow.

Interest rates won't stay the same forever.

If they go up: you will feel great about the current rate!

and if they go down, you can easily refinance and feel great about the new rate.

Create a buying criteria and a cash flow and Return on Investment criteria that is realistic and won't keep you in the sidelines forever.

(I have a friend that has been waiting to buy since 2016: He has effectively lost about $500k in equity since then if not more… ) waiting for the market to crash….

I texted him today and he didn't even answer… I bet he won't buy when the market normalizes either (he did buy a Porsche and Range Rover in that time…. )

You just have to make a decision about what you want, what location and save up for a rainy day (6 months of expenses). Buy and wait!

Evans Wright · Answer

The 2% or 50% is not the only thing that makes a good deal. As the Pirates of the Caribbean movie taught us, they are more like guidelines.  That being said, due to increasing interest rates and home prices finding properties that even remotely come close to those rules in the Charlotte market without doing a huge value add are few and far between when using traditional rental strategy. Try different approaches such as running your numbers as a Short Term Rental or seeing what you could get if you rented out by the room.  It takes a bit of creativity.  If you want to chat more, please feel to PM me.

Bruce Lynn · Answer

Look in one...city ...focus....you don't need to be all over the country....pick a market.  All of those are probably great markets.

These days I doubt you can live for free, but you can have roomies contribute nicely to your mortgage.

Dallas for example you might be looking at $350,000-$400,000 for 4bed/3bath...and rent 3 of 4 for $700/month is my guess.

What would you be willing to pay for a bedroom with shared bath access for example when you are new to the city?   Ask your friends and co-workers to get a good idea what you might command.  Ask how much extra they would pay for the private bath vs shared bath....you might make a bit more giving up the master bedroom to a roomie vs taking it yourself...so you take the 3bath as the shared 3 and 4th bedroom bath.   Also be willing to give up your bedroom for the couch or garage or tiny office...or a travel trailer in the drive for extra income.

Don't let a webinar set your investment parameters.....set them for yourself....and what you can live with.

Could find any property that can pass 2% rule and 50% rule?

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