Buy and hold

[Daniel Fierros]

Hey BP!  If I'm interested in a home for a buy and hold (rental property). What is a good price to set in for a house?  I've heard of the 2% rule but will that cover all the house expenses (taxes, insurance, any other expense I've overlooked) and still have cash flow for me?  Ex. If the house cost $60k, will $1200 a month be enough to cover everything that I mentioned?  

[Dawn Anastasi]

Originally posted by @Daniel Fierros:

Hey BP!  If I'm interested in a home for a buy and hold (rental property). What is a good price to set in for a house?  I've heard of the 2% rule but will that cover all the house expenses (taxes, insurance, any other expense I've overlooked) and still have cash flow for me?  Ex. If the house cost $60k, will $1200 a month be enough to cover everything that I mentioned?  

You have to look at the market rents for the area.  You can't just make  up a rent, it depends on what other similar properties are renting for. The "2% test" says that if a property rents for $1,000 you must buy it (and rehab it) for no more than $50,000. (Or in your example, if a property rents for $1,200 you must buy and rehab it for no more than $60,000.)

You can't just buy something for $60,000 and assume it will rent for $1,200.  The market rent may only be $800.  If you price it at $1,200 you'd never get anyone to rent it.