Trying to understand 2%/50% rules

[Matthew Brand]

I'm trying to learn more about REI and am having a little trouble with the 2% and 50% rules. I understand the concept, but I'm having a hard time believing that they're regularly feasible.

I currently own one rental property that I bought without doing any strong due-diligence. My positive experience with this property has me wanting to dive in more. When I learned about the 2/50% rules, I plugged in the values for my current rental to see how it shakes out. It comes in at about 1% for the 2% rule and just under $100/month for cash flow. So, that seems like it wasn't the greatest investment.

Where my issue comes in is that I can't imagine ever being able to get that sort of house for the rent required to hit 2%. Are there a bunch of deals that are close to those rules and I just don't know about them? Is it different per market? Something else I'm missing?

For reference, the rental property I have is in Omaha, NE and I get $1280/month in rent and I purchased the house for $123,000.

[Matthew Swisshelm]

The 2/50% rules are more like easy to remember guidelines that a lot of people like to use, they are NOT rules that are set in stone. Some markets they really can get these types of numbers. Real Estate being such a localized thing your area may not be able to support them. Like @Antonio Esquivel mentioned about the bad areas in Omaha. You could make them happen, but you would pay for it through other means I'm sure. It really comes down to knowing your market and creating your own set of guidelines. If you know that houses in the area you like will only rent for 1% of their purchase price, but it's in a great location that you really like, and it works for your business model then your rule would be 1% not 2%.

I hope this helps @Matthew Brand!

-Swiss