Rules of Thumb!

[John Freeman]

Hi Guys, 

Can someone please help me out with evaluating multi homes in LOS Angeles! I want to get an FHA loan and since it's a 'first time only' arrangement, rather than buy a single family residence (SFR), I figure maximizing my leverage on a 3 or 4 plex is the more logical way to jump in the market.

I've been reading The Ultimate Beginner's Guide to Real Estate Investing. In chapter 5 it  discusses maximizing your return. A simple 'rule of thumb' tool is the 2% rule, whereby the monthly rent should be approx 2% of property value. 

There's no way I can apply this to LA- virtually impossible...a $1,000,000 property will never generate $20,000. 

Any thoughts regarding a more realistic rule of thumb for the LA market?

Thanks,

Freeman